'NOT AS BAD AS SOME THOUGHT': Australian financial stocks surge after the banking Royal Commission report release

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Australian financial stocks closed sharply higher on Friday, boosted by the release of the Banking Royal Commission’s interim report that was perceived to less scathing than many feared.

The ASX 200 Financials Index closed up 1.2%, reversing losses earlier in the session. the index had been up more than 2% before easing in late trade.

Investing.comASX 200 Financials Index (AFXJ) Chart

All of the major banks and insurers, except Macquarie, finished up 0.7% or more. Some of the gains were considerably larger.

ANZ , $28.18 , 1.40%
CBA , $71.41 , 1.90%
Insurance Australia Group , $7.32 , 0.69%
Macquarie , $126.04 , -1.34%
NAB , $27.81 , 1.76%
QBE Insurance , $11.12 , 1.46%
Suncorp , $14.46 , 0.84%
Westpac , $27.93 , 1.16%

The initial reaction suggests markets were looking for something considerably stronger in the recommendations from the interim report, leading to a “sell the rumour, buy the fact” bounce on Friday.

Markets are still digesting the report but the early indications are that it’s not as bad as some thought it could have been for the banks. Richard Coppleson, director of institutional sales at Bell Potter, told Business Insider: “It looks at a glance that the banks have (at this stage) got off lightly.”

The bounce could also reflect that the report was scathing of Australia’s financial regulators for allowing “greed” to trump the “basic standards of honesty”.

“When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done,” it said.

“The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court.

“Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct.”

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