The Banking Royal Commission has many big four investors on tenterhooks. Who can we trust if we can’t trust the institutions who handle our life savings? Is there even such a thing as blue-chip banking shares anymore? But while the findings of the Royal Commission could continue to shock us for some time, if you zoom in on, arguably the best-known, Australian retail bank – Commonwealth Bank of Australia (ASX: CBA) – history tells us not to panic. Anyone recall the worst day for CBA shares post GFC? I reckon it was 23/1/09. CBA opened at $25.27, hit a high…
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The Banking Royal Commission has many big four investors on tenterhooks.
Who can we trust if we can’t trust the institutions who handle our life savings?
Is there even such a thing as blue-chip banking shares anymore?
But while the findings of the Royal Commission could continue to shock us for some time, if you zoom in on, arguably the best-known, Australian retail bank – Commonwealth Bank of Australia (ASX: CBA) – history tells us not to panic.
Anyone recall the worst day for CBA shares post GFC?
I reckon it was 23/1/09.
CBA opened at $25.27, hit a high of $25.28, a low of $23.90 and closed at $23.94.
The volume of CBA shares traded on the ASX that day was 8,348,152 – as a comparison the average daily CBA volume for the last 4 weeks was a little over 3 million.
The holders of over 8 million shares panicked on 23/1/09 and offloaded them.
On the same day, buyers who saw the value in that price piled in and bought them.
You know – that brave crew who live and die by the “buy on a low, sell on a high” mentality?
Perhaps they thought then that if the CBA went belly-up, there wouldn’t be much left of the share market anyway?
But that was a most unlikely scenario.
A buyer of 400 CBA shares on 23/1/09 for 24.09 paid $9,636.
From then to now the CBA has paid $34.06 in fully franked dividends – for 400 shares this means total dividends of $13,624 plus franking credits of $5,839 – a grand total of $19,463 for those who can claim the franking credit in full – and plenty of shareholders can.
These bold buyers have recovered all of their purchase price – 102% of it in fact.
But hang on, there is also some capital growth to consider.
The shares that you paid $9,636 for and for which you have already pocketed $19,463 for are now trading at $68.18 and worth $27,272.
Not to mention that a little over six years later, on 23/3/15, CBA hit an intra-day high of $96.17 – a great time to take a little profit.
And now, with the CBA around 29% off its 2015 high, is it time to buy in again?
It’s easy to get caught up in the hype, and there are legitimate concerns some investors might have as the findings of the Royal Commission unfold.
National Australia Bank Ltd (ASX: NAB) shares have taken a beating over the past few months, while Australia and New Zealand Banking Group (ASX: ANZ) has suffered through plenty of ups and downs and Westpac Banking Corp (ASX: WBC) has struggled to get its share price chart off the decline.
But most of us need a reminder every now and then that we’re in this for the long haul, and that overall, shares continually outperform property investments over time – plus they can pay you dividends, rather than charge you rates and utilities costs, that’s a big plus.
Don’t panic. Ride the waves. Be calm.
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Motley Fool contributor Carin Pickworth owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, and National Australia Bank Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.