Can NAB make a go of the Goldman Sachs JB Were broking business?
Welcome back!
During the week NAB purchased 80.1% of Goldman Sachs JB Were’s brokering business for $99 million but will be purchase be another bank debacle for the big four banks.
The brokering business has approximately 22,000 customers and while consuming around 8% of the domestic broker market in Australia is far from the hey-day of JB Were’s peak. The decision for NAB to purchase a controlling interest is a bid decision in light of the broader failures experienced by all the banks will wealth management operations.
But can NAB make a success of this? NAB have arguably bought the operations in a downturn which will benefit the bank but the business is likely to experience significant leakage of major brokers and broker clients as the leading brokers start their own operations or get snapped up by other majors like Macquarie.
The old days of brokering houses being a goldmine appear to be long gone and unless NAB can find a way to create ‘rivers of gold’ again from the operation then it’s likely it will be a failure. Althoughs JB , at a cost of $99 million is is marginal in the scheme of the banks overall operations both in positive and negative terms.
What do you think of the decision to buy the Goldman Sachs JB Were brokering operations? Are you a client who will stay with them under NAB or will you leave? Share your thoughts in our comments section.
ANZ Share Purchase Plan
ANZ retail investors can invest in the ANZ Share Purchase Plan offering investors the chance to subscribe for up to $15,000 worth of ANZ shares.
Shares can be applied for in lots of $1000 at a discounted price of no more than $14.40. With the current share price around $16.00 this offers investors an instant profit of around 10% at current market valuations.
The ANZ share purchase plan is likely to be well subscribed and scaled back applications would be unlikely considering banks would be happy to accept as much capital as possible from the market at the moment.
The deadline for applications is 2 July.
Wall Street hits lows of 1997
Wall Street fell overnight to a low last reached in April 1997 amid the worsening performance of the US economy.
On a seasonally adjusted basis the US GDP for October to Decelier fell by 6.2% annualised. The contraction in the US economy was far worst than first thought and reflects the pain occuring in the world’s largest economy. The decline in the GDP was the worst performance since 1982.
The Dow Jones slumped 1.66% to 7062.93 to take the loss for the week to in excess of 4% as the economy sees no end in sight to the gloom. Dragging the market lower was the performance of Citigroup and General Electric. The market also had its worst February in over 70 years as the market tumbled 12%.
Commonwealth Bank in profit upgrade
The Commonwealth Bank surprised the market with a profit upgrade of 20% above market expectations and announced a likely profit of around $2 billion for the half.
The announcement comes on the back of strong credit growth and strong deposit growth. The profit announcement due on 11 February is still likely to be about 16% less than the previous profit of $2.38 million for the December 2007 half but indicate the negativity towards the banks in the market.
The Commonwealth Bank share price surged today on the positive news.
Australian Banks dumped on sharemarket
Growing fears of a major recession in Australia hit banks heavily today as all bar the National Australia Bank were heavily sold off as thr market tumbled today by 5.4%.
Westpac which was previously seen as the most stable domestic bank was sold off heavily falling over 11% to $16.97 as fear gripped the market. St George who announced today that shareholders approved the Westpac merger fell by over 9%.
ANZ Bank fell just under 9% to $14.05 and the Commonwealth Bank fell nearly 6 per cent to $33.00 after warning that recent company collapses will impact upon their first half results.
The National Australia Bank faired best falling 2.66% to $19.40.
The sell-off follows market fears of further negative announcements from banks regarding their debt blowouts and likely capital raisings similar to that of the National Australia Bank earlier this week.
Upcoming Bank Profit Announcements
The next two weeks will see all the major Australian banks except the Commonwealth Bank announce interim profit figures. This will be a very important guage to determine the health of the Australian banking system and is likely to reveal the actual pain the banks have been undergoing.
Of course this will not stop the banks from making huge profits but no doubt a number of them in particular NAB and ANZ will take a hit from the economic implosion. That said, we are lucky to have such well run banks in Australia and this will provide some insulation for the issues affecting banks overseas.
Westpac will be the best performer based on the strong domestic focus and focused management. St George are also likely to fair well in the reporting season.
The reporting calender is
23rd October 2008 - ANZ Bank - Annual Profit Announcement
29th October 2008 - St George - Annual Profit Announcement
30th October 2008 - Westpac - Annual Profit Announcement
31st October 2008 - NAB - Annual Profit Announcement
The Commonwealth Bank will report their interim profit announcement on 11th February 2009.
We will report on the banks profit announcements as they are announced.