Aussie banks are OK but there’s better value overseas
“Going forward in an absolute sense the banks look ok. P/Es [price earnings] multiples are a little under the market average multiples in Australia and dividend yields are still good.“There is a bit of a risk if the housing market turns down sharply but I’m not in the camp that says we’re going to see a housing crash,” Oliver explains.
However, in a relative sense, banks in other parts of the world – in Europe and in the United States in particular – represent much better value for investors, Oliver says.
“Simply for the reason they’ve been out of favour for the past few years. Don’t forget the GFC [Global Financial Crisis] badly whacked US banks and the Eurozone crisis badly whacked European banks,” he says.
“I reckon going forwards those banks [in Europe and in the United States] will start to recover and that’s where the value is if you want to see good growth going forw
About the Author Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.
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