Findings from the banking royal commission may cause short-term falls in share prices, but investors should not get too rattled, says Morningstar.
In a statement on the Morningstar website, the research house's senior equity analyst David Ellis put out flames caused by the royal commission revelations, cautioning investors not to overreact to ‘sensationalist media’ and ‘grandstanding politicians’.
"The major banks seem to be operating in a parallel universe. On the one hand, it’s all doom and gloom with investors facing a daily avalanche of negativity.
“But on the other hand, capital levels are strong, loan quality is pristine, the economy continues to chug along at a respectable 2-3 per cent growth rate, employment growth is strong, credit growth is solid, inflation is low, and the housing market is stabilising,” Mr Ellis said.
The Morningstar analyst did acknowledge in the article that the royal commission was a “key risk” and “cast a long shadow over major banks and their share prices”.
But the number of problem cases were “small” and “not a true representation of the major banks’ customer base”.
“Major banks are likely to tighten lending standards, though not to the point of instigating a credit crunch and unleashing disastrous consequences.
“Increased regulatory oversight restricts cross-sell opportunities, future business growth, investment and innovation,” Mr Ellis said.
Wealth management relationships are under threat as clients look to switch providers driven by the impact of the royal commission. ...
S&P Dow Jones has announced a new addition to its global ESG index using enhanced ESG scores and granular data. ...
Investor confidence is on the rebound and the ASX hit a 12-year high on Monday. But it’s not all good news for the Australian economy. ...