Contributing Members
Content is delayed by one month. Upgrade your membership to unlock all content. Click for membership options.
#Industry/competitors
Added 2 months ago

Firstly this bit of information applies to any big 4 bank, not just CBA

In the past, the Big 4 used to have foreign exchange services but recently have decided to close down this service.

This means no more deposit of foreign cheques to the big banks. No ifs or buts. Justification is that not many people use foreign cheques and currency and costs too much to service.

In response it appears the smaller mutual banks (formerly credit unions) have come in to fill this hole, allowing new customers to deposit foreign cheques if it is done 3 months before the cheque expires.

Sounds crazy that people are still using foreign cheques, but most of the large instos such as Morgan Stanley still insists on writing cheques in USD for non-US customers.

Unfortunately I'm one of those customers and in desperation had to open an account recently with a mutual bank to cash a USD cheque.

Was a great experience though, looks like the funds were available within 2 months. And I didn't think it was so easy as I thought I had to be "vouched" by a member or join a trade union.

Big 4, look out! The old credit union turned mutual banks are coming to grab your lunch!

Read More
#ROE - CBA Results
Added a month ago

86706f8e64cc608ee040d1f9fd655da9882fea.png

Index has a lot of miners so RoE I imagine swings with commodity price - but still tells a story.

Read More
#Trading of Cryptocurrencies
stale
Last edited 2 years ago

As announced earlier this week, CBA is asking for a small community of users to trial their crypto platform. Then they will launch trading through their CBA app.


“In looking at ways that we can support our customers, we have made the strategic decision to form an exclusive partnership in Australia with Gemini, a global leader with strong security and a track-record of serving large institutions. CBA will leverage Gemini’s crypto exchange and custody service and integrate it into the CommBank app through APIs,” - Matt Comyn CEO CBA.

"As part of its approach CBA has also partnered with Chainalysis, a global leader in blockchain data and analytics to help compliance teams monitor and mitigate the threat of crime through crypto asset exchanges."

About Gemini

Gemini is a platform that allows customers to buy, sell, store, and earn cryptocurrencies like bitcoin, ether, and DeFi tokens. Gemini's simple, reliable, and secure products are built to empower the individual. Gemini was founded in 2014 by twin brothers Cameron and Tyler Winklevoss. For more information, visit https://www.gemini.com.


About Chainalysis

Chainalysis is the blockchain data platform. They provide data, software, services, and research to government agencies, exchanges, financial institutions, and insurance and cybersecurity companies in over 60 countries. Chainalysis data powers investigation, compliance, and market intelligence software to allow consumer access to cryptocurrency safely. Backed by Accel, Addition, Benchmark, Coatue, Paradigm, Ribbit, and other leading firms in venture capital, Chainalysis aims to build trust in blockchains to promote more financial freedom with less risk. For more information, visit www.chainalysis.com.  

Read More
#Rudimentary Accounting platfor
stale
Added 2 years ago

I recently observed that CBA has launched a 'invoice creating platform' through netbank. Similar to paypal, they can help you track customer payments and send reminders once you've issued your invoice through their platform.

I would not be surprised if they start developing rudimentary accounting systems on their business accounts for microbusiness eg expense categorisation, upload/storage of invoices (or perhaps electronic invoice straight from merchant). They already use optical readers to auto-populate payment information off a bill.

Summarising a previous forum post which I thought would be more relevant here for CBA, here are the opportunities for regaining merchant businesses and assisting micro businesses:

  • Basic invoicing functionality
  • Categorisation/management of expenses - maybe SaaS paid cloud storage for invoice document management (they already receive electronic invoices on your behalf from large utilities/comms providers
  • Ability to offer BNPL to business (not just individuals)
  • Ability to accept payments in all it's forms - foreign currencies, Crypto, perhaps Wechat Pay/Alipay in the future
  • Integration of deals such as business insurance and loan applications
  • Future: Maybe even management of electronic contracts through blockchain tech (eg House/Financing settlements/transfers)

Look out Xero, MYOB, Reckon ! The cheapest plan of the lot for these services is $25/mth last time I checked (without the timesheets and complex functions). Micro businesses will certainly take advantage of CBAs free invoice offering rather than using Paypal.

Observation: CBA offered removal of their monthly account keeping fee in favour of a 'pay per use over the counter transaction fee', leaving business customers who do most things online less disgruntled.

Observation: Through their startups thinktank, CBA has recently launched a retail deals app to capture a slice of the retail market. I'm not sure this will work but it's definitely a very interesting data capture opportunity for CBA!


Read More
#Time to Buy?
stale
Added 2 years ago

19-June-2022: CBA is Australia's second largest company (behind BHP) and is currently rated #283 here on Strawman.com (as I type this), having moved up the rankings a fair bit since their share price has reduced lately. It does say something about our primary focus here that a company like CBA rates so low in terms of people here who hold the company in their Strawman.com portfolio.

CBA is currently held here by only 4 Strawman Premium members. And I am not one of them. I have never held any of the big 4 banks in my SM portfolio.

Being the clear leader of the big 4 in terms of size and quality (and management also IMO), CBA is starting to look interesting from a price perspective:

f5c6db50289fc97fed8836f28bcf6a16cfa8ae.png



$87.26 looks like a great price when you look at that, however when you zoom out and look at the 5-year chart...



e4df6450eae77903ac53fbcd6a2b477ae45d83.png


...the pullback in 2022 hasn't been nearly so deep as the one in 2020, and I feel there is plenty of scope for that SP decline to continue further before they recover, purely based on sentiment around an impending Australian recession, and the rest of it. I think CBA is probably a decent BUY here, with a 5-year-plus view, but I think they're going lower and we'll be able to buy them even cheaper in the future, possibly the near future.

I found it interesting what FMG founder and major shareholder Andrew "Twiggy" Forrest said last week about the likelihood of a global recession this year - Andrew Forrest says no recession, but expects years of choppy markets (afr.com)

by Hans van Leeuwen, Europe correspondent

Last updated Jun 17, 2022 – 11.26am, first published at 10.36am

London: Fortescue Metals Group boss Andrew Forrest says there is “not a snowflake’s chance in hell” of a global recession this year, but warned that markets could be “choppy and uncertain” for up to three years.

Speaking to AFR Weekend during a visit to London, Australia’s richest man said Fortescue’s low cost base and its green energy plans left it well-placed to weather the storm of rising borrowing costs, soaring inflation and slower growth.


80c40d3a271e6b668f1cec2c92a7496be2ba17.png

Andrew Forrest visited France this week to sign a deal for zero-emission trucks with manufacturer Liebherr. 


He also shrugged off reports that China might create a centralised purchasing cartel to drive down iron ore prices, saying this was “a story which gets trotted out every three years”.

The Russia-Ukraine war has spurred sharp increases in energy and food prices. This has combined with rebounding post-pandemic labour markets and issues with supply chains and transport costs to fuel inflation.

“I don’t know of a better industry to be pivoting towards when fuel prices are going through the roof than an industry where you can make all your own fuel,” he said, referring to Fortescue’s ambitious plans to make hydrogen from renewable energy.

The prospect of rampant inflation has pushed central banks to start aggressively raising interest rates, sapping stock prices. Companies’ cost of capital may climb, deterring them from investing and expanding.

But Dr Forrest said Fortescue was relatively immune to these cyclical forces: it should still be able to raise capital, and could withstand any downturn in commodity prices.

“We smoke $3.5 billion worth of fossil fuel into the atmosphere every year. That is one hell of a pool of capital annually to invest into your own fuel production and green iron systems,” he said.

He also said there was still an abundance of capital looking for investible projects. “The largest part of that is for green projects, by a country mile. That’s not going to change.”

And even if the cost of capital rose or fell, “so does the commodity price”, giving him the revenue base he needs to push forward with his green transformation.

Fortescue plans to spend $800 million-plus to build an end-to-end supply chain for hydrogen and ammonia produced using only renewable energy, and is also investing in technology for hydrogen-powered or zero-emission ships, trucks and trains.

The biggest risk to Dr Forrest’s ambition would appear to be a drop in the price of iron ore, but he is not overly worried.

“Demand for our product has remained strong,” he said. “And if global demand for iron ore goes down, the last man standing will be the lowest cost producer. And that is Fortescue.”


‘Not a snowflake’s chance in hell’


Dr Forrest was not anticipating the kind of global recession that might sap demand for iron ore. He said there was “not a snowflake’s chance in hell” of that happening.

“From country to country, yes. But there’s pent-up demand from COVID and that’s now been exacerbated by the Russian invasion. And I think that demand is still going to be there,” he said.

“You are going to have a choppy two or three years; not recession, nothing hugely dramatic like a global recession. But markets are going to remain choppy and uncertain for two or three years.”

The other great uncertainty is geopolitical: the ever-lingering prospect of worsening relations between the US and China, with the potential for economic decoupling that might sweep up Australia even further.

Dr Forrest welcomed the Albanese government’s more temperate approach to relations with China as “a breath of fresh air”.

“I’ve really resented China being used in [Australian] politics,” he said.

He urged both Beijing and Canberra to “check their language” and make sure they were not creating an enmity by treating each other as enemies.

But his support for a détente with Beijing was based on “the public interest”, he said, as geopolitical tension was not a material concern for his business.

--- ends ---


RELATED

China refuses to budge on Albanese’s trade ban ultimatum

RELATED

New trade minister keen to get the ball rolling with China



So back to CBA. There will likely be further downside from here, but at some point they will become worthy of serious consideration as part of a diversified portfolio, particularly one like mine that currently has zero banking exposure.

The sell-down of the banks (including CBA) is not entirely unjustified. They WERE quite expensive, especially CBA, and the outlook is changing, however they are NOT going broke, they are very well managed, and at some point I will likely buy some if the price keeps falling.

Also, while the banking landscape will continue to evolve, I would back CBA to keep themselves at the cutting edge of banking here in Australia, as they have done so far.


b41a6ef5aa94beddb12ceb9e6d18d007b845b6.png

Source: AFR Banking Summit | Deloitte Australia

9bcb1eeb93e74e4e3afda7ab0fd7cc24ae19fa.png

Read More
#Time to Buy?
stale
Last edited one year ago

The major 4 banks face relativley slow growth prospects so I think you can for the most part expect the future returns is likley to come from dividends.

What doesn't make much sense is that you can get a similar and in some cases better income return from major bank hybrids as the equity - see below. (the yield to reset uses the futures curve which may or may not be what does occur - but the running yield is the forward 12 month return). From what I've heard you can even get Tier 2 bank notes nearing yields on hybrids.

There's some interesting (risk/return) mispricing going on in bank capital stacks at the moment.

4b84ed1d02b6a01054912105e2a8589d9d797a.png


Read More
#Management
stale
Added one year ago

Good overview of the majors - Bank reporting season scorecard (firstlinks.com.au)

The below graph is a bit scary being so low - good but gets worse/normalises? Been a really good few years for the banks in terms of bad debts and now reaping higher NIMs at the moment. Do bad debts come back to bite with higher rates?

a6bad90396e66367895cca294efd88ef69e4eb.png

Read More
#Bear Case
stale
Added one year ago

CBA at 2.7x book, pretty high for banks but not as bad as pre GFC.e3f60b6c21ddf85c063c8ecfa31692ef3f1a25.png


Around 23 per cent of all Aussie home loans – worth almost $500 billion – are currently on fixed rates and will switch to variable rates by the end of 2023. These borrowers will experience significant interest rate increases which will further squeeze household disposable incomes” Steve Johnston, CEO, Suncorp Group Ltd

Are the higher net interest margins going to offset bad debt and provisions if they (when they) arise.

Read More
Valuation of $59.72
stale
Added 6 years ago
I expect average annual growth in earnings of only 2.5% - 3.0%pa for the next few years. As such, I require a yield (ignoring franking) of at least 7%. If you want to include franking credits, you could increase this valuation to $64-odd
Read More