December 4, 2025 • 8 mins
Banks hold a unique position on the ASX - they dominate the list of the biggest companies on the bourse, but the game has changed.
Andrew Dale from ECP Asset Management joins Sean to unpack performance gaps across the majors, what’s driving the recovery stories, and the mix of banks he thinks offers the best medium-term exposure in a shifting market.
This is general information only. Seek advice tailored to your situation before making investment decisions.
Find out more: https://fearandgreed.com.au/
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome to Fearing, Greek Q and A, where we ask
and answer questions about business, investing, economics, politics and more.
I'm Sean Almer. Is it time to reconsider exposure to
the Big four banks? If so, and if it's not
too late already, which stocks should investors be looking into?
This is general information only and you should always seek
professional advice tailored to your circumstances before making any investment decision.
(00:29):
Andrew Dale is a partner at ECP Asset Management. Andrew,
welcome to Fear and Greed.
Speaker 2 (00:35):
Thank you for having me.
Speaker 1 (00:37):
We love the banks, We have always loved the banks
and financials are you know, thirty thirty five percent of
the market entail and the big four lenders the big
chunk of that. Why is it about the banks that
we like so much? And why have they run so hard? Yeah?
Speaker 2 (00:53):
Look, I mean, as you point out, banks are just
a big part of the market, so it's impossible to
ignore them. I guess the other category has been resources historically,
so the combined nature of both is simply makes them
unavoidable if you're going to invest in equities. Why do
we like them? I think really from a particularly from
a retail perspective, there's not a person in Australia that
(01:13):
has not heard of the banks, so CBA, Westpac, NAB
and A and Z. Everybody has a relationship probably with
one of them, maybe even two of them, and they
either go into branch use ATMs or they're very well
aware of the things that they provide. They have multiple products.
So it's always what I call a bit like a
household name stock, a stock that people know and understand,
(01:36):
and as a result, it's kind of easy to invest
in them. You know that they feel strong, they feel protected.
The GFC showed that they were amongst the strongest financials globally,
so as a result, not a difficult one for people
to get their heads around. And typically from a retail perspective,
they've been less worried about valuations. They've been more focused
(01:59):
on opportunity.
Speaker 1 (02:01):
Okay, so I mean ten years ago when I was
a banking writer, or twenty years ago. I hate to
say it, but I'm going to pretend it was ten,
but it was actually twenty. The whole idea that you know,
a rising tide floats or boats, and so the thing
is how long as you got into an Australian Bank,
you'd be fine right now. That has certainly not played
out in the last three or four years or post
the Hayne Royal Commission with the banks. Commonwealth Bank has
(02:21):
definitely outperformed and relative to the other three it has
been much more expensive. Now we've seen that reversed somewhat
before a few things in that. Is there much difference
between the big four Australian banks As an investor, Yeah, look.
Speaker 2 (02:37):
There really is, Sean, I mean that there's I think
CBA had that really amazing run, a performance really on
the back of what was a really simple story. You
know that historically there'd been things that you know, were
a bit hard to get your head around, but with
Matt Common coming into the business, he was able to
really streamline the offering and really focus on the existing
(02:59):
customer base, banking them more so. You know, I'm a customer,
I have a mortgage, Let's make sure I've got a
transaction account, Let's make sure I've got a personal line,
Let's make sure I've got you know, credit cards, etc.
Really focusing on simple banking, perhaps getting rid of a
bit of the offshore stuff, a bit of the other complexities,
and it made for a really good story, also combining
(03:19):
the fact that had the most customers, so it's got
the biggest retail share, the biggest retail deposit base, which
for those that don't know, the more deposits the better
margins generally because they're the cheapest source of funding. So
there was every reason for CBA, I think, to outperform.
Valuation was a problem anyway, so we can't look at
that and say, oh, it's overvalued. It has been for
(03:42):
five years on traditional metrics, So I kind of put
that to a side, and I think where is the quality.
That's the quality. If you look at the other banks,
they've all had separate stories. A and Z's much more
of an institutional bank that has offshore assets and more complexity.
It's had management related changes, It's had a whole bunch
things going on. It's kind of a specific story. It's
(04:03):
been more of a turnaround story and as a results
perform really well recently under new management. I think Westpac's
had a little bit of that. It's a bit of
a lower form of CBA in my view, like really
high quality retail bank. A lot of problems on the
back end in systems, and they've got a lot of
work to be done there, new managements come in, perhaps
there's a bit more of an excitement around turnaround, so
(04:24):
performed a bit better. And then you've got NAP, which
is specifically the biggest SME lender or business banking operations.
So if you want to get exposure to that segment
of the market, that's where you get it. So very
different exposures and as a result you seen different performances.
CBA has given up a lot of those sort of
gains that we saw perhaps over the past few years,
(04:45):
but still looking quite attractive, whereas the other stocks have
probably provided with investors with a little bit more sizzle
and a little bit more recovery stories, and I think
that's why they've outperformed.
Speaker 1 (04:55):
Andrew, I love a sizzling bank if I'm getting to
put some money in, you know, I hasten to add
all listeners should actually go and seek financial a device
before making any investment decisions. But the way to think
about it should I be thinking about, Well, I like
the SME exposure, so that's where I'll go. I'm worried
about Westpac's back office legacy issues. That's what I should
(05:15):
worry about. Common off Bank. I mean it's hard not
to worry about valuations to some point. Which one I mean,
I'm almost asking which one I should be thinking most
about or which one I should be thinking least about.
Speaker 2 (05:27):
Well, now you know what, Sean, I think I'd be
thinking differently. I'd be thinking where do I want exposures? Okay,
so let's forget like which one what do I want? Exposure?
Speaker 1 (05:37):
Wise?
Speaker 2 (05:37):
Now I think that you know, from a big four banks,
I like the I still will always like CBA from
a quality perspective. It's the highest quality of the banks
in my view, and as a result, it has a
position in your portfolio. If I want to get sm lending,
I can look at NAB. I'd probably go a little
bit a long way down the curve and think about
things like Judo Bank, not very well known by people,
(06:00):
smaller market cap sme lending only real relationship style banking,
which the big banks have sort of let go because
they can't do relationship banking if they want to get
high volumes, and as a result got much better growth,
better nims, better sort of return on equity profiles over
the medium term. So I think it looks interesting. So
I'm adding a little bit of that sort of bank
(06:21):
to the mix, and then if I want something a
little bit more different and a little bit more sort
of you know, I call it maybe spicy. But mcquari
bank you've got. You know, they're starting to wash out
some of those old earning peaks that they've had in
the past, whether they be commodity related or whether they
be related to some of the assets. Sales. Expectations for
that bank are starting to look more realistic on a
(06:42):
medium term basis, and it might just be a good
time to get a bit of exposure to something a
little bit different. So you've got CBA, Judo and McQuary.
I think with those banks right now, that's a really
good way to position yourself on a probably a medium
term view.
Speaker 1 (06:58):
And that's diversification too, putting all your money with the
big four.
Speaker 2 (07:02):
So I mean, look, hey, I wish I owned aane
Z and you know some of these other banks maybe
six months ago. But that ships sail and that's kind
of similar to the whole market. We're not going to
talk about the whole market right now, but that's similar
to the whole market. Things that were good up until
the past twelve months have kind of waned a bit.
But I think as we go into next year, they
are going to refocus on quality and they're going to
look at the high quality names that have delivered consistently
(07:25):
through successful execution over the medium to long term, and
that's the stocks I'm looking at.
Speaker 1 (07:30):
Okay, just before we go, I just want to quickly
mention beck at Queensland and Bendigo and Adelaide obviously to
the other two lenders, where do they They're certainly not
the quality spectrum of Commonwealth Bank, but certainly higher values
evaluations or low evaluations. What's your take on those two? Look?
Speaker 2 (07:48):
Look, you know, they're obviously good quality banks. They are
more regional in their focus and base. They're always going
to have a little bit more of a challenge in
terms of their cost of funding relative to the big
four banks, so it's always going to be a bit
different in terms of the exposure. I think they're a
bit more point in time, you know, So when you
see them come off a bit and you have a
predeposition to that style of focus, it's time to have
(08:10):
a look. But I've sort of, you know, in the
past of own Bendigo Bank, but you found it a
little bit more challenging to get the margins and the
return on investment that I probably want. So I'm not
ruling them out a point in time, but at the moment,
I probably prefer the three that I've already talked about.
I think they just had a longer term exposure.
Speaker 1 (08:30):
Andrew, thank you for talking to fear Ingreed. No problems
as Andrew Dale, partner at ECP Asset Management, and a
reminder of course, to seek your own quality advice before
making investment decisions. If you've got something you'd like to know,
then send through your question on LinkedIn, Instagram, Facebook, or
at fearingreed dot com. Today you I'm Schinama and this
is fear Ingreed Q and DA
Welcome to Fearing, Greek Q and A, where we ask
and answer questions about business, investing, economics, politics and more.
I'm Sean Almer. Is it time to reconsider exposure to
the Big four banks? If so, and if it's not
too late already, which stocks should investors be looking into?
This is general information only and you should always seek
professional advice tailored to your circumstances before making any investment decision.
(00:29):
Andrew Dale is a partner at ECP Asset Management. Andrew,
welcome to Fear and Greed.
Speaker 2 (00:35):
Thank you for having me.
Speaker 1 (00:37):
We love the banks, We have always loved the banks
and financials are you know, thirty thirty five percent of
the market entail and the big four lenders the big
chunk of that. Why is it about the banks that
we like so much? And why have they run so hard? Yeah?
Speaker 2 (00:53):
Look, I mean, as you point out, banks are just
a big part of the market, so it's impossible to
ignore them. I guess the other category has been resources historically,
so the combined nature of both is simply makes them
unavoidable if you're going to invest in equities. Why do
we like them? I think really from a particularly from
a retail perspective, there's not a person in Australia that
(01:13):
has not heard of the banks, so CBA, Westpac, NAB
and A and Z. Everybody has a relationship probably with
one of them, maybe even two of them, and they
either go into branch use ATMs or they're very well
aware of the things that they provide. They have multiple products.
So it's always what I call a bit like a
household name stock, a stock that people know and understand,
(01:36):
and as a result, it's kind of easy to invest
in them. You know that they feel strong, they feel protected.
The GFC showed that they were amongst the strongest financials globally,
so as a result, not a difficult one for people
to get their heads around. And typically from a retail perspective,
they've been less worried about valuations. They've been more focused
(01:59):
on opportunity.
Speaker 1 (02:01):
Okay, so I mean ten years ago when I was
a banking writer, or twenty years ago. I hate to
say it, but I'm going to pretend it was ten,
but it was actually twenty. The whole idea that you know,
a rising tide floats or boats, and so the thing
is how long as you got into an Australian Bank,
you'd be fine right now. That has certainly not played
out in the last three or four years or post
the Hayne Royal Commission with the banks. Commonwealth Bank has
(02:21):
definitely outperformed and relative to the other three it has
been much more expensive. Now we've seen that reversed somewhat
before a few things in that. Is there much difference
between the big four Australian banks As an investor, Yeah, look.
Speaker 2 (02:37):
There really is, Sean, I mean that there's I think
CBA had that really amazing run, a performance really on
the back of what was a really simple story. You
know that historically there'd been things that you know, were
a bit hard to get your head around, but with
Matt Common coming into the business, he was able to
really streamline the offering and really focus on the existing
(02:59):
customer base, banking them more so. You know, I'm a customer,
I have a mortgage, Let's make sure I've got a
transaction account, Let's make sure I've got a personal line,
Let's make sure I've got you know, credit cards, etc.
Really focusing on simple banking, perhaps getting rid of a
bit of the offshore stuff, a bit of the other complexities,
and it made for a really good story, also combining
(03:19):
the fact that had the most customers, so it's got
the biggest retail share, the biggest retail deposit base, which
for those that don't know, the more deposits the better
margins generally because they're the cheapest source of funding. So
there was every reason for CBA, I think, to outperform.
Valuation was a problem anyway, so we can't look at
that and say, oh, it's overvalued. It has been for
(03:42):
five years on traditional metrics, So I kind of put
that to a side, and I think where is the quality.
That's the quality. If you look at the other banks,
they've all had separate stories. A and Z's much more
of an institutional bank that has offshore assets and more complexity.
It's had management related changes, It's had a whole bunch
things going on. It's kind of a specific story. It's
(04:03):
been more of a turnaround story and as a results
perform really well recently under new management. I think Westpac's
had a little bit of that. It's a bit of
a lower form of CBA in my view, like really
high quality retail bank. A lot of problems on the
back end in systems, and they've got a lot of
work to be done there, new managements come in, perhaps
there's a bit more of an excitement around turnaround, so
(04:24):
performed a bit better. And then you've got NAP, which
is specifically the biggest SME lender or business banking operations.
So if you want to get exposure to that segment
of the market, that's where you get it. So very
different exposures and as a result you seen different performances.
CBA has given up a lot of those sort of
gains that we saw perhaps over the past few years,
(04:45):
but still looking quite attractive, whereas the other stocks have
probably provided with investors with a little bit more sizzle
and a little bit more recovery stories, and I think
that's why they've outperformed.
Speaker 1 (04:55):
Andrew, I love a sizzling bank if I'm getting to
put some money in, you know, I hasten to add
all listeners should actually go and seek financial a device
before making any investment decisions. But the way to think
about it should I be thinking about, Well, I like
the SME exposure, so that's where I'll go. I'm worried
about Westpac's back office legacy issues. That's what I should
(05:15):
worry about. Common off Bank. I mean it's hard not
to worry about valuations to some point. Which one I mean,
I'm almost asking which one I should be thinking most
about or which one I should be thinking least about.
Speaker 2 (05:27):
Well, now you know what, Sean, I think I'd be
thinking differently. I'd be thinking where do I want exposures? Okay,
so let's forget like which one what do I want? Exposure?
Speaker 1 (05:37):
Wise?
Speaker 2 (05:37):
Now I think that you know, from a big four banks,
I like the I still will always like CBA from
a quality perspective. It's the highest quality of the banks
in my view, and as a result, it has a
position in your portfolio. If I want to get sm lending,
I can look at NAB. I'd probably go a little
bit a long way down the curve and think about
things like Judo Bank, not very well known by people,
(06:00):
smaller market cap sme lending only real relationship style banking,
which the big banks have sort of let go because
they can't do relationship banking if they want to get
high volumes, and as a result got much better growth,
better nims, better sort of return on equity profiles over
the medium term. So I think it looks interesting. So
I'm adding a little bit of that sort of bank
(06:21):
to the mix, and then if I want something a
little bit more different and a little bit more sort
of you know, I call it maybe spicy. But mcquari
bank you've got. You know, they're starting to wash out
some of those old earning peaks that they've had in
the past, whether they be commodity related or whether they
be related to some of the assets. Sales. Expectations for
that bank are starting to look more realistic on a
(06:42):
medium term basis, and it might just be a good
time to get a bit of exposure to something a
little bit different. So you've got CBA, Judo and McQuary.
I think with those banks right now, that's a really
good way to position yourself on a probably a medium
term view.
Speaker 1 (06:58):
And that's diversification too, putting all your money with the
big four.
Speaker 2 (07:02):
So I mean, look, hey, I wish I owned aane
Z and you know some of these other banks maybe
six months ago. But that ships sail and that's kind
of similar to the whole market. We're not going to
talk about the whole market right now, but that's similar
to the whole market. Things that were good up until
the past twelve months have kind of waned a bit.
But I think as we go into next year, they
are going to refocus on quality and they're going to
look at the high quality names that have delivered consistently
(07:25):
through successful execution over the medium to long term, and
that's the stocks I'm looking at.
Speaker 1 (07:30):
Okay, just before we go, I just want to quickly
mention beck at Queensland and Bendigo and Adelaide obviously to
the other two lenders, where do they They're certainly not
the quality spectrum of Commonwealth Bank, but certainly higher values
evaluations or low evaluations. What's your take on those two? Look?
Speaker 2 (07:48):
Look, you know, they're obviously good quality banks. They are
more regional in their focus and base. They're always going
to have a little bit more of a challenge in
terms of their cost of funding relative to the big
four banks, so it's always going to be a bit
different in terms of the exposure. I think they're a
bit more point in time, you know, So when you
see them come off a bit and you have a
predeposition to that style of focus, it's time to have
(08:10):
a look. But I've sort of, you know, in the
past of own Bendigo Bank, but you found it a
little bit more challenging to get the margins and the
return on investment that I probably want. So I'm not
ruling them out a point in time, but at the moment,
I probably prefer the three that I've already talked about.
I think they just had a longer term exposure.
Speaker 1 (08:30):
Andrew, thank you for talking to fear Ingreed. No problems
as Andrew Dale, partner at ECP Asset Management, and a
reminder of course, to seek your own quality advice before
making investment decisions. If you've got something you'd like to know,
then send through your question on LinkedIn, Instagram, Facebook, or
at fearingreed dot com. Today you I'm Schinama and this
is fear Ingreed Q and DA
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