Commonwealth Bank of Australia

CBA Details
 
Strong Funding Position: Commonwealth Bank of Australia (ASX: CBA) is a well-known bank in Australia, which provides banking, financial and related services. The market capitalisation of the bank stood at $150.12 Bn as on 10^th February 2020. Commonwealth Bank of Australia and its related bodies corporate has ceased to be a substantial holder in The Pas Group Limited on 5^th February 2020. The bank recently announced that it has recognised a provision amounting to $83 million for 1H FY20 for insurance claims from customers, which have been affected by the recent bushfires in Australia.

During Q1 FY20, the company reported unaudited statutory net profit amounting to around $3.8 billion. The bank has maintained a strong funding position with deposit funding at 69% and the Net Stable Funding ratio at 112% during the quarter. The following picture provides an idea of key dates for FY20:


Key Dates FY20 (Source: Company Reports)

Well Placed to Tap the Future Needs of Customers: CBA is well positioned in a difficult operating environment due to global macroeconomic uncertainty as well as historically low-interest rates. The bank is well positioned to address the needs of its customers, illustrated by good volume growth in its core markets of home lending, business lending and household deposit, on the back of strong capital position and balance sheet settings.

Valuation Methodology:P/E Multiple Approach

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per the key personnel of the company, the company would continue to maintain a disciplined approach which delivers balanced outcomes for all its stakeholders. We have valued the stock using P/E-based relative valuation approach and arrived at a target price, which is offering marginal corrections. As per ASX, the stock of CBA is trading close to its 52-week high of $85.970. Hence, considering the valuation and 1H FY20 results which are scheduled to be released on 12^th February 2020, we have a watch view on the stock at the current market price of $84.320 per share, down 0.566% on 10^th February 2020. 

 
CBA Daily Technical Chart (Source: Thomson Reuters)
 

Macquarie Group Limited

MQG Details

Decent Rise in Net Profit: Macquarie Group Limited (ASX: MQG) provides banking, financial, advisory, investment and funds management services. The market capitalisation of the company stood at $52.08 Bn as on 10^th February 2020. Macquarie Group Limited and its controlled bodies corporate have made a change to their substantial holding in New Century Resources Limited on 31^st January 2020, and the current voting power stands at 9.57% as compared to the previous voting power of 8.47%.

In another update, the company announced its intention to make payment of $400 million Macquarie Income Securities (MIS) pursuant to the terms of issue. MIS holders would be receiving the issue price of $100 per security and a distribution payment amounting to $0.64572603 per security. The company is anticipates paying the distribution on 15^th April 2020. On the financial front, MQG reported net profit amounting to $1,457 in 1H FY20 (period ended 30^th September 2019), reflecting a rise of 11% on a YoY basis. During the same time span, the company’s capital position surpassed the regulatory requirements. The group reported a capital surplus amounting to $6.7 billion. Bank CET1 ratio and leverage ratio for the period stood at 11.4% and 5.5%, respectively.


1H FY20 Results (Source: Company Reports)

Well Positioned for Medium Term: The company is set to deliver outstanding performance over the medium term. This expectation of the company is primarily underpinned by its deep expertise in major markets, diversity, as well as the ability to adapt the portfolio mix to changing market conditions.

Valuation Methodology:P/BV Multiple Approach

P/BV Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock is currently trading very close to its 52-week high level of $147.550. As at 30^th September 2019, the assets under management of the company stood at $563.4 billion, reflecting a rise of 2%. During 1H FY20, the board of the company declared interim ordinary dividend amounting to $2.50 per share, which was franked to 40%. We have valued the stock using P/B based relative valuation method and arrived at a target price, which is offering a correction of higher single-digit (in percentage terms). Hence, in the light of stretched valuations and current trading levels, we give an “Expensive” rating on the stock at the current market price of $146.340 per share, down by 0.422% on 10^th February 2020.

 
MQG Daily Technical Chart (Source: Thomson Reuters)

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