Do you think the sell-off in bank stocks following the RBA’s June rate rise has been overdone?
The recent decline in the banks has been due to increased concern that higher interest rates will see a sharp property downturn. We believe house prices are set to decline. However, given the amount of savings held by consumers, we are unlikely to see the sharp increase in defaults that would be needed to offset the positive impact that higher variable rates have on bank earnings.
As such, we will be selectively increasing our position in bank shares through this period of volatility as we see the high and sustainable dividend outlook as a key attraction in what is likely to be a lower-return environment.
We have a preference to own stocks with exposure to corporate and government spending, with the Australian consumer likely to remain under pressure.
WBC Price at posting:
$19.33 Sentiment: Buy Disclosure: Held
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