Westpac Banking Corp
Flat but Encouraging Result in FY 18: Westpac Banking Corp (ASX: WBC) for FY 18 reported flat cash earnings growth as it came in at A$8.07 billion (US$7.96 billion), compared with A$8.06 billion a year ago. This is lower than an average estimate of A$8.18 billion from the market; and came at the back of rise in legal costs and customer refunds, linked to what was uncovered by the banking royal commission, which is now expected to be more than the $46 million it had originally estimated. The bank has delivered 1% rise in statutory net profit to $8,095 million. WBC's net interest income rose 4 percent to A$16.34 billion, while net interest margin expanded by 2 basis points to 2.11 per cent. As a result, WBC stock has fallen 9% in three months as on November 05, 2018 and is trading at a low P/E of 11.22x. The stock is trading at the price of level $26.92, and has support at $25.8 and resistance at $28.2. The group is expected to witness decent growth in earnings in long term given its overall resilient performance and funding position that can manage mortgage lending related challenges. Based on the foregoing and price at about 11x of forward earnings, we give a “Buy” recommendation on the stock at the current price of $ 26.92.
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FY 18 Financial Performance (Source: Company Reports)
Australia and New Zealand Banking Group Limited
Top officials' pay cut by 20% amid inquiry panel scrutiny: Australia and New Zealand Banking Group Limited’s (ASX: ANZ) stock rose 1.28% on November 06, 2018 and lately the company has slashed top officials' pay by 20% for FY 19 amid inquiry panel scrutiny. On the other hand, ANZ for FY 18, has reported 5% fall in the cash profit on a continuing basis to $6.49 billion. ANZ’s Common Equity Tier 1 Capital Ratio was 11.4%, up 87 basis points (bps) in FY 18, and this looks decent. Further, ANZ New Zealand has delivered a record profit of $1.986 billion, just short of $2 billion. The profit result was 12% ahead of last year, while ANZ New Zealand’s revenue rose by 3% to $4.18 billion. The financials and high dividend yield look promising despite the challenges in the banking sector. Meanwhile, ANZ stock has fallen 10.7% in three months as on November 05, 2018 and is trading at a reasonable P/E of 11.65x. The stock is trading at the price of level $26.15, and has support at $24.8 and resistance around $28. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $ 26.15.
Commonwealth Bank of Australia
Divestment of global asset management business & Key Personnel Changes to lead demerged group: Commonwealth Bank of Australia (ASX: CBA) has very recently signed an agreement to divest its global asset management business, Colonial First State Global Asset Management (CFSGAM), also known outside of Australia as First State Investments, to Mitsubishi UFJ Trust and Banking Corporation (MUTB) for the total cash consideration of $4.13 billion. This disinvestment is part of the company’s strategy to focus on its core banking businesses. Further, the total cash consideration reflects the multiple of 17.5x CFSGAM’s pro forma FY18 net profit after tax of $236 million. The projected total proceeds reflect a post-tax gain on sale of approximately $1.5 billion, comprising of an estimated post-tax separation and transaction costs of approximately $100 million. However, the deal is subject to multiple number of regulatory approvals in various jurisdictions including in Australia, Japan, Hong Kong, Singapore, the United Kingdom and the United States. The transaction is expected to complete in mid calendar year 2019. After the completion of the deal, the resulting transaction is expected to boost approximately $2.9 billion of Common Equity Tier 1 (CET1) capital, which reflects a pro forma increase to the Group’s FY18 CET1 ratio of approximately 60 basis points on an APRA basis as at 30 June 2018. Moreover, CBA has appointed Jason Yetton as the Chief Executive Officer and Andrew Morgan is appointed as Chief Financial Officer of CBA’s wealth management and mortgage broking businesses (NewCo). Meanwhile, CBA stock has fallen 7.6% in three months as on November 06, 2018 and is trading at a reasonable P/E of 12.72x. The stock is trading at the price of level $ 68.950, and has support at $65 and resistance around $70. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $ 68.950, up 1.43% on November 6, 2018.
Bank of Queensland Limited
Fall in Cash earnings for FY 18: Bank of Queensland Limited’s (ASX: BOQ) stock has fallen 11.64% in three months as on November 06, 2018 after the company for FY18 reported a 2% fall in the Cash earnings after tax of $372 million and 5% fall in the statutory net profit after tax to $336 million. Despite challenging environment, the bank has posted underlying revenue growth of two per cent driven by lending growth and an improvement in net interest margin. Meanwhile, BOQ stock is trading at a reasonable P/E of 11.27x. The stock is trading at the price of level $9.74, and has support at $9.4 and resistance around $10.30. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $ 9.740.
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Comparative Dividends (Source: Thomson Reuters)
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