Aussie bank stocks soar after ‘disappointing’ abuse inquiry
The year-long investigation stopped short of recommending a shake-up of bank structures (William WEST)
Sydney (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.
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