Banks & General Insurers

2020 has been a challenging year for the banks but we believe there is now light at the end of the tunnel for the sector’s long term investors. In this report, we highlight twelve banking qualities that support our positive view of sector attractiveness as we head into 2021.

COVID-19 bitterness aside, the majors’ underlying performance was sweetened with higher other income and broadly stable to lower operating expenses.

APRA notified ADIs and insurers back in April of the expectation “to limit discretionary capital distributions in the months ahead, to ensure that they instead use buffers and maintain capacity to continue to lend and underwrite insurance”.

COVID-19 has come with higher credit impairment charges that have also forced the banks to acquiesce to APRA’s wishes for either deferred or materially lower dividends. However, underlying performance in 1H20 continues to be sound and balance sheets are much stronger than ever before.