Post-GFC, margin loans have been out of favour with many investors. From a peak of 248,000 margin lending client accounts in December 2007, the most recent Reserve Bank of Australia (RBA) statistics indicate that client numbers are now back to mid-2006 numbers, with approximately 170,000 client accounts in existence. Behaviour by our financial institutions, though, indicate that some institutions are beginning to feel more bullish.
CANSTAR analysis has found that the average number of ASX companies on financial institutions’ acceptable securities lists has risen quite significantly since the height of the GFC, indicating that institutions are comfortable taking on a higher level of lending risk. “One broad way in which a financial institution can reduce margin lending investment risk is to reduce the number of acceptable securities,” said CANSTAR Research Manager, Mitchell Watson. “CANSTAR analysis has found that just prior to the GFC, the average number of ASX securities on the acceptable securities lists of the financial institutions we rate was 520. This number had plummeted to an average of 390 by December 2009. Even by December 2012 the average number of securities was only 419, but by December last year that number had risen to 446 securities. This perhaps indicates a more optimistic economic outlook.”
While the average number of acceptable securities overall saw a marked decline, the average number of ASX 200 companies on the acceptable securities lists remained resilient throughout the GFC. Page 2 of 3
CANSTAR today released its margin lending star ratings report, awarding five stars to outstanding lenders in two profiles – Share Investor and Managed Fund Investor. CANSTAR margin lending star ratings is a consumer-friendly benchmark that compares both the price, including the interest rate and fees and charges, and features, including the maximum LVR, the number of shares/managed funds offered, repayment options and other account features. Five-star lenders are considered to offer outstanding value for money. There are three five-star products in each of the Share Investor, and the Managed Fund Investor profiles.
Share Investor profile
Within the Share Investor profile, ANZ, CommSec and St George achieved a five-star rating, all maintaining their position from last year.
ANZ’s rating is driven by its acceptable securities score, providing lending on both the highest number of ASX 200 stocks and the highest number of stocks overall. Currently, ANZ provide lending on more than 700 stocks, which is significantly higher than the industry average of 446 stocks.
CommSec maintains superior product features with good direct client services including an unlimited transaction history, “what-if” calculators and weekly newsletters. They notify clients within 24 hours when in buffer. They also offer trading in options and warrants.
St George offers investors a good balance between features and price. On the features front, St. George offers periodic statements, “what-if” calculators and the ability to trade options among many other features to its clients.
Managed Fund Investor profile
Within the Managed Fund Investor profile, CommSec, CommSec Adviser Services and St. George all achieved a five-star rating.
Both CommSec and the advice model, CommSec Adviser Services, maintain superior product features, with the Adviser Services model providing a wider range of acceptable securities than the purely DIY model.
St George achieves the top score for acceptable securities. They have an extensive acceptable securities list with lending offered on 1,811 funds. This is significantly higher than the industry average of 1443 funds. They also offer a buffer margin of 10%.
Consumers can download the full Margin lending star ratings report on www.canstar.com.au
