Return on Equity, Cost of Equity and the Implications for Banks

David Norman

RBA Bulletin (Print copy discontinued), 2017, 51-58

Abstract: Returns on equity for the major Australian banks have declined of late, following equity raisings in 2015. At the same time, estimates of the cost of raising new equity appear to have fallen very little, despite large declines in risk-free rates. These two developments help to explain why Australian bank stocks are now trading at a declining, but still sizeable, premium to their book value.

Keywords: Return on equity; Cost of equity; Price-to-book ratio; Australian banks (search for similar items in EconPapers)
Date: 2017
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