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Once you could bank on them, but not now

ONCE upon a time, buying shares in banks was the pathway to much better returns than doing business with them whether as a borrower or a depositor.

ONCE upon a time, buying shares in banks was the pathway to much better returns than doing business with them whether as a borrower or a depositor.

Now, it does not seem to have become any better on the business side and bank stocks are just not what they used to be as a collective.

Westpac shares, for example, dropped below $21 yesterday for only the second time in two years and, at $20.77, it was their lowest closing price since July 2009.

It is a reflection of the same lack of confidence that Westpac keeps turning up in its consumer sentiment surveys and which is eating away at the foundations of local retailing.

If you are working on a yield argument as an investor dividends as a percentage of the cost of the shares Westpac is sitting at above 10 per cent. Of the other members of the big four, NAB and ANZ are above 9 per cent and CBA is at 8.8 per cent.

You cannot get those sorts of returns on your money if you park it with them in term deposits, even if you are prepared to leave it there for five years somewhere around 6.6 per cent is about the best rate kicking around.

So, the income from bank stocks looks attractive. The growing problem is that the market frame of mind is so skittish, and there are no guarantees you can liquidate an investment in bank shares for the same (or better) price than when you bought a doubt unheard of before the slow-motion financial collapse.

The yields are also fairly much in line with the price performance of each bank, in terms of low points. ANZ shares, which also finished under $21 at $20.98, have returned to their worst level since July last year. They have to dip under $20 to get back to 2009 low-water levels.

NAB and Commonwealth are "only" at the levels seen last Christmas and both still have a bit of a margin before hitting 2010 lows and even more latitude before arriving at 2009's doldrums.

For the smarties saying, "Yeah, but the whole market's cactus", Insider can assure them that the S&P/ASX 200 Index is actually 12.5 per cent above where it was around this time in 2009 when the banks began their price recovery. While the banks might not expect to surf upwards to the same degree that miners are doing on commodities demand, you might have thought they could get some benefit.

For Westpac to be showing the same sorts of gains as the broader index, its stock ought to be north of $23 a share. On the same measures, NAB should be above $25 a share, compared with yesterday's $23.46. CBA and ANZ, though, have outdone the index. The former at $49 only needed to be at $45 to beat the index, while ANZ's $21 is solidly above the $19 comparative.

Westfield shares the pain

WHILE the banks' shares are threatening two-year lows, the Lowy family's Westfield Group has had no trouble in finding them.

There is little doubt that the decline in the shopping centre developer and owner's stock is a rub off from the plunging retail sector particularly when a handful of its local, small-scale rivals are finding themselves in the hands of insolvency practitioners.

Westfield's dip below $8.50 yesterday, in the wake of David Jones's "unprecedented" sales fall, is the first time the stock has been at those levels since June 2009 and reduces its market value to below $19.5 billion.

Even if Insider adds back the roughly $8 billion attributable to the Westfield Retail Trust assets spun out late in 2010, the best that can be said is that Westfield Group has traded sideways since 2009.

While Westfield runs one of the tightest retail landlord ships around the globe, the hard truth is that some of its anchor tenants are hurting big time.

The pain being felt must cast doubt on a whole lot of things, ranging from the simple rental income all the way up to the retailers' participation in supporting shopping centre developments and refurbishments.

Consumers who shop at the centres want to go to the ones that carry the big brands with which they are comfortable (and with whom most have some form of loyalty card deal).

The pressures must now be enormous on Westfield, and others, to sacrifice profit margin for giving those key retail tenants a helping hand in fitting out new and old sites to maintain the status of the centres.

No landlord can afford to have boarded-up shops in a centre for too long.

It not only means loss of income, but makes the centre far less of a "destination" for shoppers.

ConsMedia's TV turnoff

AWAY from the malls, but still among the mauled, is Consolidated Media Holdings, which is one of Foxtel's three shareholders and, as such, a co-bidder for regional pay TV group Austar.

ConsMedia shares have not looked up for some time, and the decline has accelerated since the terms of the $1.52-a-share, $1.9 billion buyout of Austar have been confirmed.

It cannot be said that ConsMedia has overwhelmed its investors with information about the Austar offer, although that is not surprising since so much hinges on regulatory approvals both here and in the US.

ConsMedia holds what was once the Packer family's 25 per cent stake in Foxtel through Premier Media, and has told the market that it has arranged financing through ANZ and BNP Paribas for its $225 million share of funding the deal.

Until now, ConsMedia's balance sheet has stood out for being unencumbered by debt, so Insider suspects that the markdown in its stock from $2.80 to $2.40 is a market reflection of that shift, plus the several months of uncertainty until buying Austar clears all its regulatory hurdles.

What it does mean now, though, is that ConsMedia's market value has dropped by almost a third since Foxtel buying Austar broke in the public arena last year.

insider@fairfaxmedia.com.au

It is a reflection of the same lack of confidence that Westpac keeps turning up in its consumer sentiment surveys.


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