As the dust settles on last week's results from the major banks, things are not looking too bad from a share price performance perspective.
With the exception of Westpac Banking Corp (ASX: WBC) which remains down over 9% since 4 May, the other three majors are only down between 3% and 5.5%.
Here's a quick recap of the results:
Westpac reported a result which was not well received by the market with broker CommSec suggesting underlying revenue growth was just 1% and cash profit flat on the prior corresponding half.
Australia and New Zealand Banking Group (ASX: ANZ) reported a solid growth performance from its International business which helped the group achieve a 5% increase in cash profit. The move into Asia had been met with trepidation by some investors but this result appears to have calmed some of those concerns.
Commonwealth Bank of Australia (ASX: CBA) operates on a June calendar year, so it was the only major not providing a half year update to the market last week. Instead, investors got to review the bank's third quarter results. Revenue growth was strong, up 5%, but cash profits were only up around 2%.
National Australia Bank Ltd. (ASX: NAB) announced plans to demerge its troubled UK banking assets which led to the instigation of a discounted $5.5 billion capital raising. The market has been calling for NAB to offload the UK assets for years, hence the move has been enthusiastically met by investor support for the capital raising.
While the headline numbers don't perhaps sound any alarm bells, when you're dealing with something as complicated as analysing a bank, you need to delve a lot deeper to determine a conservative assessment of fair value.
Here are some questions you should really be considering:
- How will a slowing economy affect the banking sector?
- What risks are in the balance sheet?
- How will the bank be affected by a lessening of credit quality and particularly by any unrest in the housing sector?
- What is the bank's potential exposure to any changes in regulatory capital requirements?
