4 Financial Sector Stocks - NAB, WBC, IFL, MGG

Stocks Details

National Australia Bank Limited

Trading at high dividend but increased costs impacted FY 2018 results: When National Australia Bank Ltd (ASX: NAB) posted FY 2018 results, it stated that it had witnessed significant challenges. The yearly results of the bank got a hit on the back of expenses related to the restructuring as well as customer remediation. If these items are not considered, even then the bank witnessed negative impacts on the cash earnings on the back of increased spending towards the investments. However, the bank also stated that its balance sheet as well as asset quality are presently in the strong position.


NAB’s Financial Highlights (Source: Company Reports)

Increased Focus Customer Remediation Might Support in Gaining Attraction: National Australia Bank stated that the Australian economy is witnessing lower unemployment levels as well as momentum in the GDP. However, if the trade battle escalates, it might impact the Australian economy. The bank, however, has been working towards addressing the issues of the customers at a rapid pace. The bank has even come up with the new centre in order to advance remediation to the customers.

Stock Analysis: On the daily chart of National Australia Bank, two technical indicators (Moving Average Convergence Divergence or MACD and Relative Strength Index or RSI) have been applied by considering the default values. It was noticed that the stock price has just crossed the EMA and is moving upwards creating bullish momentum. Also, the 14-day RSI has started to rebound from the oversold region thus, building expectations for the bullish momentum.
As a result, we maintain our “Buy” rating on the stock at the current market price of A$24.100 per share, while it trades at a lower PE multiple against many peers.


 
NAB Daily Chart (Source: Thomson Reuters)

Westpac Banking Corporation

Improved income scenario while WIB and Consumer Businesses witnessed negative impacts: In FY 2018, Westpac Banking Corporation’s (ASX: WBC) consumer banking business witnessed the negative impacts mainly because of the net interest margins. This division also encountered a rise in the expenses of 5% in FY 2018 on the YoY basis due to investment as well as remediation. Additionally, the revenues of Westpac Institutional Bank business witnessed the hit because of lesser large transactions as well as markets income. However, Westpac Institutional Bank business saw favourable momentum in the margins and there was also disciplined management of the costs.


Consumer Banking Division (Source: Company Reports)

Deployments Towards Digitization, Supporting the Customers: In November 2018, the management of Westpac Banking Corporation gave insights about the expected performance of the bank. As per the management, the focus, moving forward, would be on the deployments towards the digital initiatives so that the customer service can be enhanced.

It also plans to extend the helping hand to the customers moving forward and it would also be focusing towards delivering significant shareholder value. In November 2018 media release, the bank’s management also stated that robust momentum with respect to the employment will be witnessed.   

Stock Analysis: On Westpac Banking Corporation’s daily chart, Moving Average Convergence Divergence or MACD has been applied by considering the default values. As per the observation, even though the MACD line has crossed the signal line and is moving downwards, there are expectations that the MACD line would again cross the signal line and after this, upward momentum would be witnessed.
As a result, we maintain our “Buy” rating on the stock at the current market price of A$25.440 per share.


 
WBC Daily Chart (Source: Thomson Reuters)
 

IOOF Holdings Limited

Recovery in prevailing negative sentiments: Wealth management group, IOOF Holdings Limited (ASX: IFL), lately came under pressure with APRA releasing a notice on disqualification orders of key personnel of the group. This came on account of breaches of Superannuation act. On the other hand, in FY 2018, IFL posted UNPAT or underlying net profit after tax amounting to $191.4 million, slightly up against market expectations. The company’s FUMA or funds under management, administration and advice stood at $125.9 billion reflecting the growth of 28% on the YoY basis. The management of the company stated that positive movement was witnessed in the organic growth. Additionally, the company has been focusing towards maintaining the discipline with respect to the cost management. The improvement with regards to cost-to-income ratio was also encountered.


Momentum in flows (Source: Company Reports)

Industry fundamentals, Acquisitions to Support IFL Moving Forward: Company’s adviser numbers, fundamentals of the industry as well as acquisitions would continue to support the performance of IOOF Holdings Limited. Market performance as well as client satisfaction would also be the key tailwinds for the company’s performance. The latest twist on allegations by APRA, however, can play a different role.

Stock Analysis: On the monthly chart of IOOF Holdings Limited, Relative Strength Index or RSI has been applied and default values have been considered. As per the observation, the 14-day RSI has reached the oversold region and soon a rebound might be expected. Therefore, moving forward there are expectations that the stock price would witness some recover. As a result, we maintain our “Hold” rating on the stock at the current market price of A$4.830 per share, up 7.3% on December 13, 2018.


 
IFL Daily Chart (Source: Thomson Reuters)
 

Magellan Global Trust

Diverse Portfolio: Magellan Global Trust (ASX: MGG) has started trading on Australian Securities Exchange or ASX in October 2017. The trust has managed to garner capital amounting to $1,575 million with the help of the IPO or initial public offering. At the end of June 30, 2018, MGG had made deployments in the twenty companies and has been garnering substantial proportion of the revenues from the internet and e-Commerce industry.

MGG’s Industry Exposure by Source of Revenues (Source: Company Reports)  

MGG happens to work for generating the risk-adjusted returns and has the time frame of medium-to-long term.

Favourable Momentum in Online and Technology Stocks Might Support MGG: Moving forward, the performance of Magellan Global Trust would be impacted by the fluctuations which might arise in the global markets. Therefore, any macro-economic factor or geopolitical variable could have an impact on the performance of MGG. Additionally, the performance of MGG might be supported if the trade battle between the US and China comes to an end as this would substantially support the global equity markets.

Stock Analysis: On the daily chart of MGG, Moving Average Convergence Divergence or MACD has been applied and default values have been considered. After careful observation, it was noticed that the MACD line has crossed the signal line and is moving upwards. Thus, the stock might witness bullish momentum.

As a result, we maintain “Buy” rating on the stock at the current market price of A$1.680 per share.  


 
MGG Daily Chart (Source: Thomson Reuters)
 

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