The CBA has resumed trading this morning and is currently down just 0.83% at $81.00 a share after becoming the latest of Australia’s major banks to raise capital in order to satisfy APRA’s increased requirements last week.
This stock price weakness as the banks raise fresh capital sets up some profitable opportunities, according to Deutsche Bank analyst Andrew Triggs. In a note to clients this morning, Triggs said:
Following recent capital raising activity in the sector, the banks are looking increasingly good value to us, with the major banks as a whole now trading ~9% cheap to the 5yr avg PE rel vs the Industrials ex Banks (0.73x PE rel vs 5yr avg of 0.80x).
As the chart highlights, Triggs said: “ANZ and WBC continue to offer the best value relative to historical PE rels.”
Triggs also highlights Australian banks are not expensive when compared internationally.
“The major banks are now trading in line with the 12m fwd PER of the large cap US banks, however provide a much better forward yield,” he said.
That is something offshore investors might find attractive if they want to buy Aussie banks on a currency neutral basis. If Triggs is right, that could further underpin the banks.