• Andreas identifies four drivers of Codan's strong performance: Read here.

Good news this week for two Montgomery holdings


Good news this week for two Montgomery holdings

Firstly, Seek Limited (ASX:SEK) subsidiary Zhaopin Limited (NYSE:ZPIN) received a boost when it reported 3Q14 revenue growth of 32 per cent year-on-year (YOY); and EBITDA growth of 34 per cent YOY.

We will be investigating why the unaudited result was so strong given the company had been growing at around 11 per cent YOY; and Zhaopin’s key competitor, JOBS, reported 3Q14 revenue growth of just 13 per cent YOY.  The result, which was reported under A-IFRS (Australian Accounting standards), will differ to the results prepared under GAAP for its US listing.

In other piece of positive news, the major banks have – as we anticipated in our research and investigation of the impacts from David Murray’s Financial System Inquiry – already started reducing their deposit rates and it seems competition for deposits has evolved to cooperation.

This is ideal for Bendigo & Adelaide Bank (ASX:BEN) as it can piggy-back on these lower-rates to expand its margins. We have assessed that Bendigo Bank is much more leveraged to margin improvements than volume increases, so these trends are going in the right direction for them.

As the Financial System Inquiry increases mortgage risk-weightings for the major banks, deposit rate reduction will likely only accelerate – much to the chagrin of income dependent retirees. We have reported on this as well as the inevitable increases in the D-SIB (Domestically Systemically Important Banks) capital requirements, you can watch our video here with the ABC’s Ticky Fullerton.

By way of example, while the Reserve Bank of Australia has not moved official interest rates since August last year, three-month, six-month and one-year term deposit rates have been cut in recent months.

Figures from our good friend Andrew Willink’s website RateCity show, three-month term deposits have fallen the most. National Australia Bank, Westpac and ANZ have cut their rates by at least 20 basis points since June, almost equaling an “official” RBA reduction. Rates on six-month term deposits have also dropped 11 basis points since July, to an industry-wide average of 3.26 per cent, and 12-month deposit interest rates have fallen a similar amount, to between 3.2 and 3.3 per cent for all of the major banks.



Roger is the Founder and Chief Investment Officer of Montgomery Investment Management. Roger brings more than two decades of investment and financial market experience, knowledge and relationships to bear in his role as Chief Investment Officer. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. Hi Roger,
    as someone that is heavily invested in cash at the moment it is really hard getting a decent return, ubank, 2.9%!
    And my share portfolio is also copping it hard! tough times at the minute.
    I do think the market is still way over value, but have found really good value in the US at the minute (through scaffold)
    Have you any thoughts?

    • Dear Aaron,

      Be sure at all times to seek and take personal professional advice. I do wonder whether or not we are in for a period of modest returns – a thesis supported by challenges in the economy, low interest rates and a tougher outlook for banks, materials and retailers…

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