Negative commentary is never far away when you are holding bank shares like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC).
Don't get me wrong, I'm not buying ASX-listed bank shares.
You can read my disclaimer in the link below. I own shares in the European owner of ING Direct, ING Groep; US bank Wells Fargo and…(one moment as I check my portfolio because it has been months since I logged in)…Lloyds Bank. In addition, in the future of banking space I own Apple and PayPal. Although, I wouldn't buy PayPal shares today.
Anyhow, I'm not a buyer of ASX bank shares because I think there are better opportunities elsewhere, including overseas.
However, I think it is worth at least trying to present a somewhat balanced argument.
Reasons to Sell Big Bank Shares in 2017
- House prices are eye-watering and the implications for a market crash or meaningful correction are significant
- Wages growth is lacklustre and likely to stay that way, affecting loan serviceability and demand for credit
- Interest-only loans are a now a significant part of the big bank loan portfolios
- Household debt levels are at a record high
- The interest rate cycle may have bottomed
- Bad debts are at record lows
- Competition is increasing, forcing the banks to move rates higher out of cycle
- Regulation is increasing
- Everyone hates the banks
- Their dividends are cyclical
- Their earnings streams are correlated (that's finance for 'not as diversified as they could be')
- Shares are modestly overvalued
- If you are like most Aussies, you could be overexposed to the domestic property and banking system
- Finally, Australia has gone 26 years without a recession — that's a world record
Ok, breathe… here are some of the reasons not to sell your Big Bank shares…
Reasons to Hold Your Bank Shares in 2017
- If you're a long-time shareholder you will be forced to split your profit with the ATO
- The big banks are profit machines defying the odds with their cartel-like control of the market
- They pay big fully franked dividends
- The potential to lower costs with technology provides some dry powder
- Shares are not that expensive
- No-one knows when property or the economy will crash
- The banks have an implicit guarantee from the Government
Foolish Takeaway
The Big Banks have been great investments over the past two decades in a recession-less Australia. In that time they were deregulated, went out and acquired every competitor they could, then ramped up their lending. Now, the seasons are turning.
I'm not buying Aussie bank shares today or this year. But, as always, it is your decision whether or not to sell your shares based on the facts.
