Wingate Asset Management has little faith in the financials sector.
Global equities fund manager Wingate Asset Management has declared financial companies as its least favoured sector to invest in.
"In financials ... that is probably where we have the least confidence," Wingate Asset Management chief investment officer Chad Padowitz said. . "Financials are by definition highly leveraged, probably less so than a while ago, but still they can't make too many mistakes," he said.
Padowitz argued that capital raisings and loose monetary policies prevented the banks from undergoing drastic restructurings.
"It seems like the latest crisis was a missed opportunity," he said.
"If it had lasted longer and more pain had been taken I think we would have better reforms and possibly have better long-term consequences."
Padowitz was particularly concerned about the almost universal lack of loan growth in banks.
"This is a very rare occurrence since World War II. It is very hard for banks to make money when their balance sheet is declining," he said.
"Financials are not cheap anymore - investors don't get compensated for that risk."
Although Australian banks were in relatively good shape, Padowitz said they are also exposed to a number of risks.
He said they generally operate on low margins compared to their international counterparts, are heavily dependant on overseas funding and have a relatively concentrated customer base.
"Only one of these three things has to go wrong and prices collapse, as we saw during the crisis when overseas funding dried up," he said.
The two non-consecutive alphabetic letters encountered most often last week caused more controversy than the underlying policy they represented, Wouter Klijn writes.... read more »
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