**goblins mates buying up big****, page-12

I have to agree with goblin, I am now very bullish NAB. The charts say that it has reached support level from February / March and is extremley oversold. This is the 7 down day following the 3, 5, 7 trend.

This courtesy ABN Amro: As you all know the RBA increased rates by 25 basis points. And the question is how will this affect the banks. Basically higher rates change the investor preference between defensive and cyclical stocks. So the expectation is that banks will underperform cyclicals (ie miners) as bond yields rise, given the cyclical stocks will benefit from global demand and improved pricing power. This suggests that the banks may have further underperformance ahead of them as the global recovery accelerates. Let’s look at Banking 101, typically banks borrow short and lend long and therefore rising short rates penalise this mismatch in liabilities vs assets. However the Australian banks are slightly different in that the majority of their assets (i.e mortgages) are priced off the overnight cash rate (OCR). As such, most banks are asset sensitive i.e beneficiaries of rising short rates. The banks that are most at risk are those with a greater reliance on the wholesale market and securitisation for funding. This is especially so if the market starts to price in further rate rises and the RBA does not follow with rises in the official rate. If this gap between the 90 day BB rate and the OCR widens then bank margins are exposed. In this scenario, banks with a greater reliance on wholesale funding such as NAB, ANZ and WBC can
suffer. CBA and the regional banks (with a greater proportion of retail deposits) gain a marginal benefit
(although arguably are more exposed given their reliance on home lending growth). While higher interest rates will impact consumers ability to pay (especially given recent increases in debt) evidence suggest we would need to see this accompanied by an increase in unemployment for severe credit stress to emerge. Greatest risk here is unsecured consumer lending i,e credit cards. Housing looks less of a risk given low LVRs. The macro influence will continue to affect sentiment and this may instigate PE contraction. In this scenario we consider the banks most at risk are those with a higher reliance on house lending (i.e regional banks) while banks with a more diversified income stream will be least at risk. Thus our analysts retain an investment preference for the two cheapest banks ANZ and NAB which both have well diversified income streams (ANZ in New Zealand and NAB in UK) and in wealth management. ANZ go ex 51c tomorrow and after yesterday’s 2% fall look rather attractive but keep in mind that the ANZ rights will keep pressure on the stock.

Watch NAB tomorrow, i'm predicting at least $30.20