Banks outperform the market
Welcome back!
The recent performance of the Australian banks on the ASX has been impressive. All the banks have risen strongly off recent lows and while gains have moderated future share price gains look certain.
During the recent global downturn the gains in market share by the Australian Big 4 banks has been staggering. As the smaller lenders and part players in the market have either disappeared or been acquired by the big four the future gains of the big banks has been even further cemented.
The real issue in the Australian banking sector now is the lack of competition in the market. As the big banks have approximately 90% of the market share alternate market lenders lack the mass and capital to compete. This will lead to future out-performance of the banks and increasing lending margins that will impact home buyers much more than investors.
RBA strike with interest rate rise to 3.25%
The Reserve Bank Governor Glenn Stevens hiked rates today by 0.25% to 3.25% on the back of strengthening signs of economic recovery and rising concerns at the RBA of potential inflation risks from low interest rates.
The rate increase, the first since April 2009 when rates were decreased to 3.00%, signals a move by the RBA to limit the possibility of rampant inflation on the back of historically low interest rates. The move is not likely to be the end of the cuts with talk already of another increase on Melbourne Cup day in November.
All big banks are likely to pass on the rate increase promptly.
What do you think interest rates will go up to by the end of 2010? Share your thoughts in our comments section.