Create Free Account

By creating account you will get access to hot stocks & personalised emails

Blue-Chip

Three Banking stocks – Is there a Compelling Opportunity?

September 21, 2015 | Team Kalkine
Three Banking stocks – Is there a Compelling Opportunity?

Australia and New Zealand Banking Group



Delivered decent earnings performance, focusing on super regional strategy: Australia and New Zealand Banking Group (ASX:ANZ) generated decent performance in spite of the CET1 ratio pressure, with the group’s cash profit surging by 4.3% year-on-year (yoy) to $5.4 billion in the nine months ended on June 30 of fiscal year of 2015. Statutory profit improved by 11% yoy to $5.6 billion in 2015, against $5 billion in prior corresponding period (pcp), on the back of better customer franchises across Australia, New Zealand and Asia Pacific. Customer deposits witnessed solid performance with a surge of 9.5% on a year over year basis, driven by net loans and advances increase by 7.7% yoy during 2015. The bank is also selling its Esanda dealer finance business, an $8.3 billion business of loans to motor vehicle dealers, to focus on its core business. In fact, the latest update reveals that the Australian antitrust regulator has given the decision of not opposing a possible bid from Macquarie for ANZ’s vehicle-finance unit. Global markets business income for ANZ rose 6% yoy to $1.8 billion during the nine months ended on June 30 of fiscal year of 2015, while the customers for International and Institutional Banking improved 9% yoy, boosted by Asian business. ANZ is heavily focusing on its Asian business growth and launched a “super-regional strategy” program to build a solid presence in Asia as compared to its Australian peers.


Year to date as at June 2015 performance (Source: company reports)
 
Stock Performance: ANZ shares have been under pressure this year, and witnessed a decline of over 13.7% year to date (as of Sep 21 close) on investors’ concerns of impact of CET-1 ratio requirement and tough market conditions in China (which would impact the bank’s Asian business). On the other hand, ANZ clarified that its China assets have a stronger average credit rating than the bank’s Institutional assets in Australia and New Zealand. Moreover, China’s Exposure at Default comprised only 3% of the bank’s EAD, while its total Institutional Asia Exposure constituted 12% of the group’s EAD. The bank is also trading at a relatively cheaper P/E of 10.5x, as compared to its peers like MYS (P/E of 11.8x) and WBC (P/E of 13.1x). Having a decent annual dividend yield of 6.4%, we maintain our bullish stance on the stock at the current price of $27.72.


ANZ Daily Chart (Source: Thomson Reuters)

National Australia Bank



Strong Outlook despite UK Pressure: National Australia Bank Ltd (ASX: NAB) stock continued to be under pressure, even though the bank reported a revenue increase of 4% on a year over year basis during the third quarter of 2015. NAB estimates an additional £500 million impact from its UK operations as well as increased the provision to the range of £290 million and £420 million, related to Clydesdale Bank for the 2015 full year results. The shares fell over 6.3% in just last three months (as of Sep 18 close). On the other hand, NAB had already diverted over a £1.7 billion funds under its conduct mitigation package. National Australia is also focusing on its core business, and accordingly improved its asset quality in Australian and New Zealand business and took initiatives to deal with its legacy issues. NAB invested on its home lending, SME and Specialized Business, to improve customer experience as well as improved its business banking loan portfolio and wealth business. National Australia bank also offers attractive valuation as compared to its banking peers, and trading at a P/E of 12.7x. The group has an annual dividend yield of 6.4% while its return on equity is 10.9%.


NAB Daily Chart (Source: Thomson Reuters)

Based on the foregoing, we give a “BUY” recommendation to National Australia Bank at the current stock price of $30.47.



National Australia Bank’s credit risk exposure (Source: company reports)
 

Bank of Queensland



Acquisitions and focus on new channels to drive growth: Bank of Queensland Limited (ASX: BOQ) reported an increase of 19% of after tax cash earnings to $167 million for the first half of 2015, from $140 million in the corresponding period of last year. Synergies from BOQ specialist acquired by the group during July 2014 contributed to the performance Specifically, BOQ specialist business contributed a net profit after tax of $19 million, in line with the bank’s estimates and is further expected to achieve a full year target of $38 million earnings guidance. The statutory profit after tax surged by 14% on a year over year basis to $154 million. Bank of Queensland improved the fully franked interim dividend by 13% yoy to 36 cents per share during the first half of 2015, from 32 cents per share in the corresponding period of 2014. The bank intends to deliver growth through its channels like BOQ specialist, broker and virgin money mortgages, and BOQ is in line to achieve its guidance of 45% of cost to income ratio during the second half of the year. The group’s efforts to offer on-balance sheet mortgages to BOQ specialist customers is generating better results than forecasted, which would further boost BOQ performance. The bank recently raised over $150 million by issuing Wholesale Capital Notes at a margin of 4.35% over the 6 month Bank Bill Swap Rate. Meanwhile, BOQ’s total capital ratio increased to 12.4% in May 2015, from 12% in February 2015. The bank is trading at a reasonable P/E of 15.8x and has an annual dividend of 5.7%.


BOQ Daily Chart (Source: Thomson Reuters)

We remain bullish on BOQ and give a “BUY” recommendation at the current price levels of $11.95.



Capital adequacy (Source: company reports)

Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people.Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation.Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product.The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
Copyright
Copyright © 2015 Kalkine Pty Ltd ABN 34 154 808 312. No part of this website, or its content, may be reproduced in any form without the prior consent of Kalkine Pty Ltd.
Kalkine is a trading name of Kalkine Pty Ltd ABN 34 154 808 312, which holds Australian Financial Services Licence No. 425376.
Small-Cap
One Energy Stock Focused on Strengthening Asset Reliability and Driving Organic Growth -KAR
November 26, 2024Team Kalkine
Mid-Cap
Technical Analysis on One ASX-Listed Stock – CIA
November 25, 2024Team Kalkine
Blue-Chip
Key Business Insights on this Consumer Staples Company– TGT
November 25, 2024Team Kalkine
Small-Cap
One NASDAQ- Listed Movies & Entertainment ADR Under Radar- iQIYI, Inc
November 22, 2024Team Kalkine
Blue-Chip
One Internet Services & Infrastructure Stock Near Resistance Levels – SNOW
November 22, 2024Team Kalkine

Get In Touch

By submitting your details and clicking on the Register button below, you agree to Kalkine’s Terms and Conditions and agree to receive marketing offers, including to be contacted by email or phone, as set out in our Privacy Policy. Any calls will be made by Kalkine Pty Ltd or Kalkine Solutions Private Limited on our behalf.You also agree that Kalkine/KSPL can give you its Financial Services Guide by electronic means (including by website link or email). Before accessing our services, please read the Financial Services Guide available here.

Please wait processing your request...

Our Company

Useful Links

Contact Us

ISO Certified Market Research

Kalkine Solutions Private Limited, authorized representative of Kalkine Pty Ltd, holds ISO 27001:2022 certification bearing Certificate No.- IC-IS-2404072

Our Company

Useful Links

Contact Us

Disclaimer

The information given by Kalkine Pty Ltd ABN34 154 808 312 (Australian Financial Services License Number 425376) on this website is general information or advice only.

It does not take into account any of your personal objectives, circumstances or needs. Choosing an investment is an important decision. If you do not feel confident making a decision based on the recommendations Kalkine has made in our reports, you should consider obtaining personal advice from an authorised adviser.

There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. Terms & Conditions have been provided for our services, please go through them and also read our Financial Services Guide.

Our website may contain information on past performance of particular investments. Past performance is not an indicator of future performance. Hypothetical returns may not reflect actual performance. Any displays of potential investment opportunities are for sample purposes only and may not actually be available to investors.

The information on the website does not constitute an offer to sell securities or a solicitation of an offer to buy securities. Our reports contain general recommendations to invest in securities.

Copyright 2024 Krish Capital Pty. Ltd. All rights reserved. No part of this website, or its content, may be reproduced in any form without our prior consent.