Why now is a great time to invest in bank shares - as finance expert reveals why extended lockdowns are a GOOD thing for the industry
- Share market research group Fat Prophets said bank shares good investment
- They argued lockdowns showed why closing bank branches was a good idea
- House prices are still are record highs, even in Sydney, despite the restrictions
Australian bank shares are regarded as a good investment despite lockdowns in Sydney and Melbourne.
On the surface, a seventh week of restrictions in Sydney would appear to be bad for banks, who are again offering 90-day loan repayment holidays to struggling borrowers.
New South Wales on Tuesday recorded another 356 new daily Covid cases, the highest since the pandemic, with stay-at-home orders likely to endure beyond August 28.
Nonetheless, share market research group Fat Prophets said the lockdowns would be unlikely to hurt the banks - and even help them.
'Although the latest coronavirus outbreak has given some reason for pause when considering when the nation will finally be through to the other side of the crisis, the response playbook has successfully been established with a mix of lockdowns and government support,' it said.
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Australian bank shares are regarded as a good investment despite lockdowns in Sydney and Melbourne. On the surface, a seventh week of restrictions in Sydney would appear to bad for banks, who are again offering 90-day loan repayment holidays to struggling borrowers (pictured is a Sydney branch before the lockdown)
While Sydney's south-west remains a Covid red zone, the lockdown damage has not caused a spike in bank loan defaults.
'Bad debts across the industry have been much lower than anticipated,' Fat Prophets said.
ANZ's share price hit a record high of $28.88 on Tuesday, following a July 19 plan to buy back $1.5billion worth of shares.
Commonwealth, Australia's biggest bank, was also in record territory with a share price of $106.18.
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Westpac ($25.55) and National Australia Bank ($26.93) were marginally below the February 2020 record high before the pandemic.
Sydney is now in the seventh week of lockdown, but Fat Prophets said the Covid restrictions demonstrated the banks' the strategy of closing branches as more customers went online.
'The sector has been rationalising its physical branch network, with people now used to doing most banking online and these cost savings are here to stay, offsetting pressure from complying with regulations,' it said.
House prices in July also hit record highs in 70 of Australia's 88 real estate sub markets, based on a collection of neighbouring suburbs.
New South Wales on Tuesday recorded another 356 new daily Covid cases, the highest since the pandemic, with stay-at-home orders likely to endure beyond August 28. Nonetheless, share market research group Fat Prophets said the lockdowns (pictured is Bankstown in Sydney's south-west) would be unlikely to hurt the banks - and even help them
In Sydney, median values surged by another 2.1 to an even more unaffordable $1.258million, CoreLogic data showed.
The current lockdown, unlike the national one in March 2020, has so far failed to dent real estate values in Sydney.
'Housing markets have continued to strengthen, with prices rising in all major markets, while housing credit growth has picked up (great for the banks), with strong demand from owner-occupiers, including first-time buyers,' Fat Prophets said.
'Investors are also increasing borrowing.'
The NSW and federal governments on July 13 announced the JobSaver scheme, offering businesses weekly payments of between $1,500 and $10,000 if their revenue had plunged by 30 per cent or more as a result of the lockdowns.
The maximum help per week was increased to $100,000 on July 28, with the payments are based on 40 per cent of their weekly payroll.
Under new laws, individuals receiving commonwealth Covid disaster payments won't have to pay tax on them (pictured are people at Bankstown in Sydney's south-west during lockdown)
Federal Parliament on Tuesday also passed the Treasury Laws Amendment (COVID-19 Economic Response No. 2) Bill 2021.
Under these laws, individuals receiving commonwealth Covid disaster payments won't have to pay tax on them.
Payments of up to $750 a week for Australians who lose more than 20 hours a week of work, and $450 for those losing eight to 20 hours a week of work.
Fat Prophets said the lockdown would also see the Reserve Bank of Australia continue buying government bonds to help boost financial activity.
The cash rate is already at a record-low of 0.1 per cent and the banks are offering fixed mortgage rates of 2 per cent.
The RBA's Term Funding Facility provided $188billion to the banks to provide cheap housing and business loans between March 2020, when the pandemic began, and June 2021.
Fat Prophets recommended ANZ, National Australia Bank and Bank of Queensland, now at $9.45 a share.
'We reiterate our positive ratings for the banks under our coverage,' it said.
