Hayne Report: The Fallout

Australia | Feb 05 2019

A summary of broker responses to the financial sector Royal Commission report including stock-specific recommendations.

-Hayne recommendations seen as no big deal for banks
-No shocks for wealth managers
-No great boost for platforms
-Mortgage brokers lose

By Greg Peel

Veteran bank analyst Brian Johnson of CLSA believes the recommendations of the Royal Commission report are broadly in line with his expectations and given the banks have already begun to implement many of the recommendations (and their share prices already de-rated), he thinks banks stock prices could now move higher.

Yes, well.

At the time of writing, Commonwealth Bank ((CBA)) is up 4.7%, Westpac ((WBC)) 7.0%, ANZ Bank ((ANZ)) 6.2% and National Bank ((NAB)) 5.0%. Among the wealth managers, AMP ((AMP)) is up 9.5% and IOOF Holdings ((IFL)) 13.9%.

The common themes among broker responses to the Hayne report are (1) not as bad as feared; (2) the sector had already been moving towards making a lot of the changes recommended and (3) financial stocks had already substantially de-rated, limiting downside risk.

The report “didn’t make material game changers,” says UBS. “As we expected, nothing radical,” says Deutsche Bank, who adds: “Indeed it's quite practical but some may say too docile. The Royal Commission recommendations are largely an extension of recent regulatory changes.”

“No big deal for banks,” says Shaw Stockbroking. “Major Banks breathe a sigh of relief,” suggests Citi.

“We view the release of the final report as incrementally positive for the major banks,” says Morgan Stanley, “because there were no unexpected, material, adverse outcomes”.

This article does not intend to outline the various recommendations made by the Hayne report -- we’ll leave that to others. This article rather looks at how analysts see those recommendations as impacting on individual stocks in the financials sector.


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