Argo chief Jason Beddow: Bank bashing won’t achieve anything

Argo CEO Jason Beddow says dragging the big four bank bosses before a parliamentary committee is just “lip service”.

Argo CEO Jason Beddow at the Adelaide Convention Centre. Picture: Kelly Barnes

Argo Investments chief executive Jason Beddow says the Turnbull government’s plan to drag the big four bank bosses before a parliamentary committee once a year is just “lip service” and he does not think Canberra’s chest-beating will change anything.

Argo Investments is Australia’s second-largest listed investment company with more than $900 million invested in the four major banks, but Mr Beddow said the lenders should expect a bit of scrutiny from time to time.

“They all moved rates in the same way last week and they all put up term deposit rates. It’s very rare that any of the banks do anything by themselves — generally they move in unison,” Mr Beddow told The Australian.

The big four, which were then followed by the rest of the sector, withheld about half of the Reserve Bank’s latest rate cut in a bid to protect profitability.

Argo and its 80,000 shareholders are large beneficiaries of the banks’ generous dividend ­payouts.

The $5 billion investment giant yesterday booked a profit of $216.3m for the year to the end of June, down 5.2 per cent on the same period a year earlier. Revenue slid 5.7 per cent over the ­period, but a one-off $18.6m benefit from the demerger between BHP Billiton and South32 played a large part in the decline.

Discounting the spin-off, Argo’s profit climbed 3.2 per cent, year on year.

Argo will pay a final dividend of 15.5c per share, bringing the year’s total distribution to 30.5c, up 1c on last year’s payout and a record for the group. The previous high dividend was just before the GFC in 2007-08. It is the fourth successive increase in the annual dividend.

Argo, which counts Don Bradman as a former chairman, has paid dividends every year since it was established 70 years ago in 1946.

Mr Beddow said the government was forced to do something in the wake of the banks’ withholding of the latest rate cut, due to the mix of members in the hostile Senate, and said the annual committee would not result in any damage to the lenders.

“The banks are a fairly strong lobby group. They’re there in Canberra in some way, shape or form at some level every week. Having to report to Canberra once a year is a bit of lip service really,” he said.

“It’s very naive to think the banks aren’t in Canberra a lot more often than that.”

Mr Beddow also brushed off the suggestions that a royal commission, which is still being thrown around as a possibility by the opposition and some members of government, would damage the banks.

“At the end of the day, what would a royal commission come up with and what would they enact that was forward looking and not retrospective? I don’t know. The bark might be worse than the bite.”

While ANZ has re-based its dividend after booking impairments and provisions in its Asian business, Mr Beddow said Commonwealth Bank and Westpac were likely to maintain their payouts. NAB, on the other hand, had an excuse to slice its distribution following the Clydesdale demerger. Argo sold out of the de-merged British bank after a strong pre-Brexit rally.

Argo’s investment portfolio returned negative 1.2 per cent over the year, a period “characterised by macroeconomic and political uncertainty” and heightened volatility due to masses of liquidity pumped into markets by central banks.

But while many other listed investment companies took the opportunity to move their portfolios into stocks in the mid-cap and small-cap parts of the market as the big end of town underperformed, Mr Beddow said the large-cap strategy would continue to pay off in the long run: “Although the skew of Argo’s long-term portfolio to some of the larger sectors may have negatively impacted our relative performance this year, these broad portfolio settings will continue to deliver solid growth and dividend income in the longer term.”

Mr Beddow said Argo took advantage of volatility in the market to build stakes in existing stocks and to add new companies to the group’s range of investments. These included stakes in CBL, Estia Health, Genworth Mortgage Insurance, McGrath, M2 Group, Reliance Worldwide and Rural Funds Group. Some of the group’s biggest selldowns included Medibank ­Private, CIMIC, UGL and Clydesdale Bank.