ZCZC
BCN-03
AUSTRALIA-ECONOMY-BANKING-POLITICS-STOCKS
Aussie bank stocks soar after ‘disappointing’ abuse inquiry
SYDNEY, Feb 5, 2019 (BSS/AFP) – Share prices of Australia’s major banks
soared Tuesday as investors expressed relief that a national inquiry into
abuses in their sector shied away from harsh measures which could threaten
profits.
Financial stocks had been under sustained pressure ahead of Monday’s
publication of a Royal Commission report, which revealed rampant misconduct
and poor treatment of customers.
The year-long investigation referred more than 20 cases to regulators for
possible prosecution, but crucially for markets, stopped short of
recommending a shake-up of bank structures.
At midday trade in Sydney Tuesday, shares in the “big four” banks were
tracking higher, with the nation’s biggest financial house Commonwealth Bank
up by 4.59 percent to Aus$73.52, ANZ by 6.34 percent and Westpac by 6.55
percent.
Even stocks in National Australia Bank (NAB), whose chairman and chief
executive were singled out by the inquiry’s commissioner Kenneth Hayne,
jumped by 4.70 percent.
“The much anticipated release of the Royal Commission Final Report was
disappointing, in our view,” UBS analyst Jonathan Mott said in a note to
clients.
“The final recommendations fell well short of market expectations…
Without powerful recommendations, we are concerned that ensuring lasting
cultural change over the years may be difficult, especially as management and
Boards rotate.”
Deutsche Bank analysts said Tuesday the 76 recommendations — which
included closing legal loopholes and increasing protections for consumers
such as banning some aggressive sales practices — were practical but
possibly “too docile”.
Global ratings agency Moody’s added that the report’s lack of calls for
wide shake-up of banking structures was a “positive for bank profitability”.
Mortgage brokers and other non-bank financial institutions, which face
stricter regulations and the removal of commissions if the recommendations
are adopted, were the big losers, with share prices in listed firms tumbling
Tuesday.
Despite investors’ optimism, there were dark clouds hanging over the
future of NAB’s chair Ken Henry and chief executive Andrew Thorburn, who
cancelled a long period of annual leave Tuesday to return to work.
Veteran banking analyst Brian Johnson of CLSA said change at the top of
NAB was likely.
BSS/AFP/MR/1132 hrs