Australia’s financial sector is rehiring again, here are names and suggestions for you to consider on some of the nation’s major employers in the financial sector.
Here is a list of some of the companies we think might benefit from the rebound:
1. Westpac Banking Corporation (Bank)
Westpac Banking Corporation (WBC) is Australia’s oldest bank operating a significant banking franchise in Australia and New Zealand with balanced exposures to retail, corporate and institutional sectors.
Aggressive expansion via acquisition in the wealth management area has complemented the banking activities transforming WBC into a solid financial services house.
Following the acquisition of St George Bank, Westpac is now Australia’s leading bank by market capitalisation and market share in key areas.
More recently WBC has been expanding services domestically, mainly its wealth management.
It has made acquisitions including Rothschild, BT Financial Services and Hastings, transforming the bank into an integrated financial services group.
Wealth management remains central to ongoing growth despite the sell-down of 40% of BT Investment Management in an IPO in November 2007, and recently acquired Ascalon from St George as well.
These acquisitions has transformed Westpac into one of Australia’s largest funds management business and give them an advantage in terms of the growth from rebound in the sharemarkets.
2. Commonwealth Bank of Australia (Bank)
Similarly, CBA has not wasted opportunities in the global recession and has made some interesting and profitable acquisitions.
Commonwealth Bank of Australia (CBA) is Australias largest retail bank and one of the Big Four. It also operates in New Zealand and Asia. Its core business is the provision of retail, business and institutional banking services.
It is also a major fund manager and has increasing market shares in general and life insurance.
Colonial is its major investment arm and is one of Australia’s largest funds management business, offering a wide range of investment funds ‘” both for institutions and for individual investors. Commonwealth Bank also owns CommSec, Australia’s largest online stocking broking firm and owns over 400,000 investors as its users.
In 2008, Commonwealth Bank acquired BankWest, a bank it wanted to acquire for many years, and the acquisition was made at very good price as the parent company (HBOS) from UK was facing serious financial crisis and did a fire-sale to Commonwealth Bank.
This acquisition has consolidated CBA’s position in the banking sector, especially the mortgage sector, and also expanded into the Western Australian market with large market share as well as the younger generation consumers market as BankWest has been very aggressive in expanding into these niche segments.
3. Australian Securities Exchange (Stock Exchange)
We have talked about ASX in the past, like any other stock exchanges around the world, they are expected to benefit from the rebounding sharemarket. They can benefit from increasing capital raising activities including IPOs and secondary raising activities, we have finally seen a number of new & high profile IPOs in Australia now, after almost 18 months of quiet period.
Put into comparison, in 2007, there were over 200 IPOs admitted onto ASX, for the entire 2009 to date, there was not even 10 IPOs in Australia, and the global market is also very quiet.
Furthermore, the primary trading revenue are derived from trading activities, we have seen very strong trading activities in the Australian sharemarket, and these will add further revenue for ASX.
4. Platinum Asset Management (Fund Manager)
The next group of companies that will benefit from rising equities market are fund managers. There are around 50 listed fund managers in Australia, we will cover some of the major ones in this article.
Platinum Asset Management is one of the major home-grown asset manager in Australia. Its flagship Fund, Platinum International Fund is also one of the largest international fund operated in Australia with impressive track record.
For instance, despite of the global financial market meltdown, the fund still reported very good performance with good distribution, and is amongst the top performing funds last year, beating the index and majority of other fund managers in Australia even in the world.
The fact it can perform well in almost all the bear markets has attracted a lot of attention from local and international investment funds. Platinum also has other regional and industry specific funds under management and they are growing rapidly, including Asian Fund, Brands Fund, Healthcare Fund and Technology Fund.
There has been returning fund inflows back into Platinum, and this will certainly assist its financial performance over the next 12 months.
5. IOOF (Fund Manager)
We have also looked at AXA, IOOF and BT in this group. IOOF is a niche player in the funds management business, it is not just one fund, but actually provides a platform to distribute different funds, from different fund managers.
The advantage of this model is offering investors a wide range of choices from fund managers and asset classes’ perspective.
Traditionally, IOOF has worked very closely with financial planners in distributing its products to financial planners and investors.
When the sharemarket returns the growth cycle, we will expect more fund managers joining into IOOF’s network and expanding the product to investors as well.
6. BT (Fund Manager)
BT and AXA are another 2 major fund managers in Australia. BT is now owned by Westpac Banking Corporation, and was listed in 2007. Since the acquisition made by Westpac, BT had created a good competitive advantage in terms of expanding its network tapping into Westpac’s client base, this has assisted to expand its customer base considerably and is now catching up to Commonwealth Bank’s Colonial Investment division as the largest fund manager in Australia.
Since then, Westpac acquired St. George, which also added new distribution networks for BT’s range of products, as well as integrating other funds management products under one brand and distribution.
We do expect BT’s customer base will growth further, and as Westpac has set this as a priority in its strategy to grow its business and funds under management.
7. QBE Insurance Group (Insurance)
QBE is one of the world’s largest insurance providers, it is an iconic Australian and a global brand. QBE is benefiting from the current market from a number of fronts.
1) Positive returns from sharemarkets and investments will help it to lift its corporate earnings
2) A number of general insurance companies have collapsed, including AIG related insurance companies, this has helped QBE to secure customers from other insurers, switching to QBE
3) Other insurance companies in Australia have all underperformed to QBE, caused by financial crisis or natural disasters, again this helped QBE to maintain its lead in Australia’s insurance industry
4) Strong AUD has helped QBE to continue its international expansion, QBE is an acquisition driven company, and have been using this perfect situation to further expand into North America and Asia.
8. Macquarie Bank (Investment Bank)
Another “Australian Global Icon”, Macquarie Bank is a true global investment bank is ranked as one of the world’s top financial institutions with operations all around the Globe.
Macquarie’s performance was adversely impacted by the global recession as most of its businesses are tied with financial services and investments. It has suffered a number of setbacks as it had provided lending to a large number of infrastructure projects and provided highly leveraged “Structured products”
For the past 12 months, it had been a restructuring period for Macquarie Bank, it had sold a number of infrastructure funds to shore up its balance sheet, it had retrenched a large number staff, it had closed down quite a number of structured products and focusing on more traditional, conservative investments.
The restructure had led to good recovery to Macquarie’s share price, which is always correlated to the overall performance. Moving ahead, we believe Macquarie will recover from the past mistakes and regain its leading position in the financial services industry again.
Macquarie is unique compared to other Australian financial institutions, if you only want to invest in Australian Banks / Financial Institutions but with some exposure to global opportunities, this is pretty much the only choice you have in Australia.
9. IRESS Technology (Technology)
We have mentioned in our foreword that technology is another sector anticipated to benefit from the “rebound financial market”. Australia has a number of financial technology companies, and IRESS is one of them. IRESS is only partially owned by ASX, and there have been rumours surfacing around for years that ASX may eventually make a move to acquire the company.
Iress’ products are now being widely used by Australian institutions and individual investors, it has sold its products in Canada and Singapore as well. Its growth has been underpinned by the rapid growth of the popular CFD market.
It is one most the most popular CFD platforms used by traders (both for CFDs and Forex), it has easy navigation screen supported by live information data and trading tools.
It is a highly competitive market, with major players from Europe and North America, and Iress has been staying in front of the competition as it is also an R&D driven company, always developing and researching into new trends and niche markets, providing tools to support investors’ demands.
Its revenue is closely correlated to trading volumes, as more investors and traders are returning to the market, and with new CFD providers setting up their operations in Australia again, requirement for their licenses will continue to rise.
10. Computershare (Technology)
Computershare is another global icon but very few people outside Australia actually knows this is an Australian company. Now based in Melbourne, Computershare is the world’s largest share registry company, managing millions of transactions each day on behalf of investors and companies.
It has dominant position in the share registry industry in Australia, Hong Kong, Canada, some US States and Europe.
Its business involves in managing the statements, dividends, transactions. If you receive a dividend statement, 2/3 times will be from Computershare, or maybe the annual reports, or maybe your holding statements, these are outsourced to Computershare for database management.
It is a simple but essential service required by companies worldwide. As more companies are being listed, or if new capital raising activities are announced, we can expect the demand for their services will increase substantially as in 2006 and 2007.
Furthermore, Computershare is now a true global business, we expect 2010 will be an active year for IPOs and capital raising in the US market, where Computershare has been building up its presence, mainly through acquisition and integrating smaller players in US, using the strong AUD as a good leverage.; US based revenue is likely to improve in 2010.
Furthermore, Computershare has spent considerable resources in upgrading its documentation management technologies, these investments are starting to pay off, it has reduced a large number of workforces with documentation applications and management software and systems; these systems have also been outsourced to stockbroking firms worldwide for them to process statements and buy & sell transactions for their clients.