Hearings in the long awaited banking Royal Commission start today with the examination of evidence and some questioning of witnesses.
The main focus for will be in the mortgage segment of the banking business, which includes over $1.7 Trillion in residential mortgages.
We believe one of the pricing risks to the banking shares revolves around the alleged $500 billion in “liar loans”: or loans which have been made using false information.
What’s worse is that over $92 billion of these loans are alleged to have been generated by bank officials falsifying information.
We believe the impact of the Royal commission has already been priced in to a degree. However, we still see the price risk going forward skewed to the downside.
The chart below of the BetaShare ASX Financial ETF illustrates the current neutral reading in the local shares.
BetaShare QFN ETF