Banks' profits fall for first time since GFC
Readers will know that W&D is not a fan of oligopolies, especially of banks. And bank shareholders wouldn't be a fan either, at the moment.
For the first time since 2008 the combined profits of the big four banks have fallen over a financial year, down by a combined 2.5%.
The banks' share prices had a magical run for 6 months leading up to March, 2015. The banks had started paying out larger and larger dividends (and boosting the bonuses of the senior executives whose bonuses were based on Total Shareholder Return i.e. share price increase plus dividends - possible conflict of interest, there), which was attractive to retail investors who thought that banks' share prices could only go up.
Stock brokers and financial planners fed the frenzy, in the face of the banks' poor profit outlook and increasing need for capital. The speculation as the share price of CBA approached $100 reminded W&D of Poseidon, the darling of the 1969 nickel boom. Not that CBA's share price is going to collapse like Poseidon's (which went from $0.80 to $280 then back to $55, all in seven months).
But minus 26% since the peak of April 2015 is, well, an ouch. But CBA is not Robinson Crusoe: