The Australian Financial Review is reporting that one of Australia's most famous fund managers in John Sevior is claiming that now's a good time to buy shares in the likes of Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA).
Mr. Sevior is a former Perpetual Limited (ASX: PPT) fund manager, but went on to co-found Airlie Funds Management with another ex-Perpetual stockpicker in Matt Williams. Airlie Funds Management has now been sold to powerful international equities manager Magellan Financial Group Ltd (ASX: MFG) that intends to grow funds under management by increasing its retail distribution footprint.
According to the AFR Mr Sevior believes now is a good time to buy CBA shares because it has moved to divest several of its non-core businesses that are more capital intensive and carry more regulatory risk.
For example Commonwealth Bank has sold its life insurance business to AIA for around $3.8 billion, while its wealth management business Colonial First State Global Asset Management is also being sold for $4.1 billion to Japanese asset manager Mistsubishi AFJ.
This will free up capital for CBA and potentially allow it to pay out more cash to shareholders in the form of ordinary or special dividends.
As the banks simplify their businesses to focus on their core business of home loan lending and retail or business banking regulatory complexity reduces, as does the chance for them to run into trouble via the likes of the Royal Commission.
Mr Sevior also noted that by focusing more on home loan lending the banks were also reducing their risk profiles, which is correct because Australian home loans are collateralised by physical bricks-and-mortar, whereas business lending for example can be higher risk and the banks are more reluctant to take part.
The other major attraction for investors in the banks that are reshaping their business models over the short term is that they continue to retain a robust outlook thanks to their strong competitive positions and big dividends. CBA for example offers a 6.6% trailing yield based on today's price of $69.73.
