Hedge funds bet against Australia's Big Four banks

Font size :
Short positions on Australia's Big Four banks—Commonwealth Bank of Australia, Australia and New Zealand Banking Group Ltd., Westpac Banking Corp., and National Australia Bank Ltd.—collectively soared 50 per cent this year to $6.46 billion, with hedge fund managers believing that the housing market is close to a downturn.

"Australia now has one of the biggest housing bubbles in history," said asset manager Jonathan Tepper from US-based hedge fund consultancy Variant Perception. Among the shares he recommends in anticipation of a major property downturn are Australian banks.

And it appears like there is a reason for this assumption, as ANZ became the nation's first major lender to cut its dividend since the global financial crisis following millions worth of bad debt charges and shrinking net profit.

"Short sellers are likely to deem Australian banks as mispriced based on dividend and earnings risk," said Nicholas Vidale, portfolio manager at hedge fund Man Group.

Moody's Investor Service also added to investor concerns, forecasting weakening bank earnings and rising bad debts. Similarly, banking analysts at Morgan Stanley, Goldman Sachs, and UBS predict more dividend cuts.

"One doesn't have to be overly negative to expect Australian bank earnings growth to stall," Vidale said. "Dividends are likely to be higher than what the banks can sustain."

Despite these, Australia's Big Four banks are benefiting from expectations that the Reserve Bank will further cut official cash rates from a record low of 1.75 per cent.

"Australia's major banks don't make good shorts," said Andrew Macken, a fund manager at Mongomery Investment Management in Sydney. "Even if their profit prospects may look weaker than in the past, they're still some of the most profitable in the world, competition is limited, and they enjoy an implicit government guarantee."

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Saturday, Sep 23, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords