Intercity rivalry doesn't stop at banks - and Sydney comes out on top

Putting aside the geographical rivalries, the NSW wags have a point - of sorts. Which institutions have been responsible for some of the biggest daily stock price falls in the past nine months?

In the most recent race to the bottom since Friday, NAB has just pipped ANZ with the biggest decline in percentage terms - 13.5 per cent as opposed to 10.9 - and clearly won out in the loss of market capitalisation - $7 billion compared with $3.8 billion.

The cause of those quite staggering numbers was not that either bank was making sensible provisions for loans that were starting to go sour. That is part of the banking cycle.

No, they were clobbered because the writedowns were much bigger than had been signalled and because the market was taken by surprise by how quickly - and how badly, particularly in the case of NAB - their bad debt situations had changed.

The net effect was to cause collateral damage to the share prices of the other three, with Commonwealth shedding $5.29 over the two-day trading period that spanned NAB's and ANZ's announcements, St George $3.45 and Westpac $2.47.

And that was despite hurried statements from the Sydney banks seeking to put distance between them and the troubles being experienced by their Melbourne counterparts.

As one insider in Sydney said after NAB's $830 million provision: "Our shares should have been up, not down, given their announcement." While said partly in jest and partly in recognition that the whole sector gets hammered in the sheep-like sell-off that usually follows such bad news, the executive's argument was valid.

Under the ASX's continual disclosure rules, companies are required to inform investors of material changes to their financial positions. That is why ANZ and NAB made their statements when they did.

What is interesting - and what was either inferred or directly addressed by the follow-up announcements by the "Sydney three" - is that they have no material exposures or coming writedowns (or write-offs) requiring disclosure before their next results.

(That is unless there is a big corporate casualty such as Centro, which is being nursed through its difficulties but which could go bust if the US banks ask for their money back. That aside, the feeling is that the market should not be expecting profit warnings from the other three like the $600 million reduction NAB is anticipating, or the possible $800 million shrinkage at ANZ after closing the books on its 2008 results.

All of this is a "quick skim" analysis of the relative performances of the top five banks, but yesterday UBS provided a more serious examination of the Sydney-Melbourne divide in its sector update (minus St George), coming down in favour of the two NSW heavyweights.

Factoring in the bad news about deteriorating loan books, higher mortgage costs, falling credit growth and the general slowdown in the Australian and New Zealand economies, UBS has concluded that Commonwealth and Westpac are the best tips for investors, given their relatively stable earnings. UBS's team has cut its profit forecasts by 1.1 per cent for Commonwealth (from net profits of $4.71 billion to $4.66 billion) and for Westpac by 0.1 per cent (a $5 million fall to $3.7 billion).

By contrast, ANZ suffers a 15 per cent fall to $3.12 billion and NAB a slight trim to $3.8 billion, although UBS has slashed the latter's earnings expectations by almost 20 per cent - or nearly $900 million - since January.

On those calculations, a cautious UBS suggests Commonwealth and Westpac are the picks of the bunch, with ANZ third - on the basis that it could eventually deliver better earnings - and NAB a distant fourth.

It is only one view, of course, but still a telling one, especially when it comes to putting distance between the two capitals of banking.