Jeremy Sullivan of Hamilton Hindin Greene and NBR's Duncan Bridgeman discuss this week's share market news
ANZ Bank [NZX: ANZ] this week flagged global credit risk as a headwind for the banking sector, warning wholesale funding costs will probably increase.
However, there are other forces at play buffeting banking stocks.
Jeremy Sullivan, an analyst at Hamilton Hindin Greene, told NBR Radio’s Andrew Patterson he believes increasing regulation from across the Tasman is driving much of the negativity among investors.
“Essentially, as part of the Basel III accord, the Australian Prudential Regulatory Authority is asking the banks to hold a lot more Tier 1 capital so, with more shares on issue and relatively flat earnings-per-share, that’s leading to a lower share price.
“To give you an idea of these capital raisings, the Australian banks raised $A18 billion in the last 12 months and they are going to have to raise another $A12 billion from here to meet their obligations.
“So more mouths to feed with the same earnings has seen the share prices being sold off.”
ANZ’s share price has suffered more than other bank stocks possibly because of its greater exposure to Asia.
This week it said its provisions for soured loans will be higher than expected due to recent market volatility leading to a deterioration in credit quality in its business lending in southeast Asia.
ANZ shares are down about 25% over the past 12 months.