Dont get mad get even

Published in The Advertiser, March 2008

The only way to beat the bank is to own it, or so the saying goes.

But if you’re not Sir Richard Branson and have a lazy billion or 40 lying around to buy one, don’t despair.

You can still make money out of the banks in other ways.

If you would rather get a cheque from your bank than a new fee schedule consider investing in financial stocks.

Shares in Commonwealth Bank, which recently reported an interim net profit of $2,385 billion, climbed 252 per cent in the 10 years to September 2007. Westpac grew 228 per cent, ANZ 204 per cent and NAB 87 per cent. The banking sector has also paid some of the best dividends.

“And they’re generally fully franked dividends, which makes them even better,” said analyst Dale Gillham from Wealth Within.

“If you can pick up 6 per cent fully franked dividends, it’s worth more like 8 or 9 per cent as a cash product.”

Greg Hoffman, an analyst at The Intelligent Investor, said bank shares were an important part of a diversified portfolio. “They’re too big a portion of the economy to ignore,” he said.

But Mr Hoffman stressed there was risk involved when investing in the sharemarket.

“While the conditions for the banks in the past 15 years have been very good, the future may look quite different to the past. Every now and then banks can go through periods when they get themselves into hot water and there is a chance we’re heading into one of those periods,” he said.

“If the banks get hit with some big bad debts then those dividends could be at risk.”

Mr Gillham said anyone investing in financial stocks now should “expect (the share price) could be lower in the next few months”.

“But if your outlook is long term you will make money.”

Another option is to buy the building or office space the bank operates in.

Apart from perhaps the defence forces, banks make good tenants and the branches tend to be in prime locations.

Suncorp’s executive general manager real estate Peter Affleck said the main appeal was the security of having a blue chip occupant and longer term leases.

For instance, one BankSA branch put up for lease in Adelaide last year has occupied the site for almost 100 years.

Also keep your eyes peeled for special offers. BankSA last week sold 12 branches for $9 million to free up capital for growth.

The branches had secure leases, most for seven years and with an opportunity to renew the lease for a further 15 years. Rents range from $16,575 to $209,300 a year.

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