Question 1: I watched your masterclass on fixed interest with great interest, particularly the segment on hybrids. As I’m a security holder with Suncorp, I’ve received a prospectus for their Suncorp Capital Notes 3. Are these in any way similar to the Commonwealth PERLS XII hybrid?
Answer (by Paul Rickard): Yes, almost identical. Same fixed distribution margin of 3.0% over the 90 day bank bill. Term (to both call date and exchange date) is approximately 1 year shorter. The securityholder offer closes on 12 December.
Question 2: Is it a good idea to invest more in all the major banks at this share price? Or do I need to wait to get a clearer picture on banks, fines and profits.
Answer (by Paul Rickard): I think there is some value in Westpac at the current price, and the share purchase plan provides existing shareholders with a way to do this at a 2% discount. I don’t, however, expect any immediate re-rating.
Commonwealth Bank, which is benefitting from a “bank flight to safety” is expensive at over $81.00. There is uncertainty around ANZ’s capital position due to action by the New Zealand regulator, while there are also some concerns regarding NAB and a disclosure about AUSTRAC issues.
Question 3: Thank you for your Income and Growth portfolios this year. I have been more than happy with my returns based on these portfolios. My questions are – will you be resetting both portfolios, when do you think that will be and do you expect major changes?
Answer (by Paul Rickard): I will re-set the portfolios at the start of 2020. There will be some re-balancing, but I don’t expect major changes. Perhaps a little more defensive orientation.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.