Australian banks remain the subject of intense regulatory scrutiny, which is likely to cause share price volatility in the year ahead, says UBS.
UBS banking analysts Jonathan Mott and Rachel Bentvelzen said Aussie banks currently face 15 different major inquiries.
They range from the banking Royal Commission announced by the Turnbull Government in November, to various legal proceedings regulatory reviews.
The pair summarised each investigation in the table below, which provides a useful reference point for the year ahead:
Mott and Bentvelzen said the current level of domestic regulatory oversight contrasts with the global trend.
“While many regions around the world are seeing a push back against regulation in the banking industry, in Australia the banks continue to face significant headwinds,” they said.
The pair said many investors are likely to be indifferent to the various investigations, given Australia’s history of close regulatory oversight.
Furthermore, the big Australian banks have met the regulatory requirements for “unquestionably strong” capital levels and will continue to benefit from their dominant position in the market.
However, “at a minimum these inquiries will lead to ongoing volatility in share prices as the market prices in potential negative outcomes into their releases,” the analysts said.
“We believe that in aggregate these inquiries, reviews and legal proceedings will have a negative impact on shareholder returns. However, where the dust settles is difficult to predict.”
The pair said it was difficult to predict what recommendations will stem from the Royal Commission — set to be released in February 2019 — although it was likely to focus on responsible lending standards.
Regarding the civil legal proceedings launched by Austrac against the Commonwealth Bank over money laundering allegations, they said the market is currently pricing in a fine payable by CBA of between $1-$2 billion.
The ASX200 financials index is off to a sluggish start to the year, having dipped slightly from its 2017 closing level of 6,529.20.