Cba Offering Discount Loans For Tab Punters

Sydney Morning Herald

Tuesday May 12, 1998

By SEAN AYLMER Banking Writer

Commonwealth Bank yesterday became the first lender to offer personal loans at a discount interest rate to investors buying TAB shares.

The 9.95 per cent loan is 2.75 percentage points lower than the bank's normal unsecured personal loans. It includes a $50 application fee and the offer is available immediately and closes on June 12.

Commonwealth's general manager of financial products, Mr Adrian Cosenza, said the loans would allow more people to buy shares. He said loan applications were subject to normal credit criteria. Commonwealth uses the shares as security against the loan.

There's a minimum loan amount of $2,000 and a maximum of $20,000. Loans can be out to seven years and there is no early repayment penalty.

Market Faxts director, Mr Chris Gosselin, said: "On the loan side it looks pretty good. On the share side ask your broker if TAB shares look good. If you are going to buy TAB shares because you can get a loan, then it's not a good idea.

"People should realise that if TAB shares fall in price, then they still have to repay the loan," he said.

For investors wanting to borrow money for TAB shares, the loans are an attractive option if the new company's share price rises by more than 9.95 per cent each year. This does not include capital gains tax, which for some individuals means the shares need to rise by closer to 20 per cent to make the loan worthwhile.

Banks, including Commonwealth, offered similar deals when one-third of Telstra was floated late last year. A $10,000 loan for Telstra shares would have allowed the investor to buy about 5,100 shares. At a 9.95 per cent interest rate over three years, an investor would have repaid $1,782.36 so far, including $450 in interest.

But there are no guarantees that TAB shares will perform as well as Telstra shares.

Indeed, most stockmarket experts have predicted that TAB will do substantially less than Telstra has done in its first six months.

© 1998 Sydney Morning Herald

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