Stocks’ Details

Australia and New Zealand Banking Group Limited

Update on Buy-Back Share Programme: Australia and New Zealand Banking Group Limited (ASX: ANZ) updated the market about the progress on several transactions under its ongoing buy-back event. The group intends to buy back remaining shares with an aggregate consideration of A$1,395,212,666 out of A$3 Bn. As of now, the group has bought back the total of 5,72,02,334 shares via on-market trade for the total consideration of $ 1,60,47,87,333.77. Besides this, the group entered into a non-binding term sheet agreement to transfer a partial economic interest of its Pensions and Investments (P&I) business and the legal ownership of its Aligned Dealer Groups (ADG) to IOOF Holdings Limited from October 01, 2018. According to the agreement, IOOF will pay an initial payment of $800 Mn to ANZ which is equivalent to about 82 per cent of the economic interest in ANZ’s P&I business. There will be no capital benefit until the final completion of the rest P&I businesses expected towards the end of the first half of 2019. On the financial front, RoE stood at 11.89% in 1HFY18, against the value of 11.75% in 1HFY17, marking the marginal growth of 14 bps on Y-o-Y basis.


Return on Equity (Source: Company Reports)
Meanwhile, the stock price was up by 5.82% in the past three months as at August 01, 2018 and is moving towards its 52-week high level ($30.800) post a fall noted during the Royal Commission investigation. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $28.91, considering the positive macroeconomic condition in Australia and New Zealand region ahead.
 

National Australia Bank Limited

Trading at Reasonable level: National Australia Bank Limited (ASX: NAB) provides personal banking solutions that include internet banking, transaction accounts, savings accounts, term deposits, and deposit accounts, and specialized accounts like, foreign currency, business interest, statutory trust, community free saver, and farm management accounts. NAB is one of the fourth largest banks in Australia in term of market capitalization (circa 76.5 Bn as of August 02, 2018), earnings and customer base. On the financial front, the half year 2018 revenue grew by 2.5 per cent with the growth in housing and business lending combined with higher margin, partly offset by lower markets and treasury income. Net interest margin (NIM) marginally increased by 5 bps to 1.87% in 1HFY18 from 1.82% in 1HFY17. This marginal rise was mainly impacted by reprising and lower funding costs, partly offset by the impact of the bank levy and housing lending competitions and product mix changes during the same period. In the last 12 months, this stock has reached a high of $32.980 and a low of $25.900; and its current price of $27.810 places it 15.6% under its 52-week high and 7.5% over its 52-week low. Currently, it is trading at a reasonable P/E of 14.37x. Based on the foregoing, we give a “Hold” recommendation on the stock at the current market price of $ 27.810.


Strong Contributions from Business and Private Banking and NZ (Source: Company Reports)
 

Bank of Queensland Limited

Recorded Decent Capital Adequacy Ratio as at 31 May 2018: Bank of Queensland Limited (ASX: BOQ) has recently disclosed its Basel III Pillar 3 for the quarter ended 31 May 2018 wherein the group was able to meet its disclosure requirements under the Australian Prudential Regulation Authority’s (APRA) Prudential Standard APS 330. According to the release, the Board had set the Common Equity Tier 1 Capital target range to be between 8.0% and 9.5% and the Total Capital range to be between 11.5% and 14.5%. Of which, the group was able to record a Common Equity Tier 1 Capital Ratio and Total Capital Ratio of 9.3% and 12.9%, respectively as at 31 May 2018. Further, the management believes that its’s capital management strategy will continue to maintain its capital level to protect the deposit holders as per APRA guidance.


Capital Adequacy (Source: Company Reports)

Besides this, the group disclosed its distribution payment of AUD 1.00770 with dividend distribution rate of 1.90 % per annum for BOQPE - CAP NOTE 3-BBSW+3.75% PERP NON-CUM RED T-08-24 and it will be paid on August 16, 2018 with the record date of July 31, 2018. Meanwhile, the share price has risen 10.29 per cent in the past three months as at August 01, 2018 and is trading above its 52-week low ($9.600). Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 10.900, considering aforesaid facts related to capital adequacy ratio.

Westpac Banking Corporation

In-Line 1HFY18 Performance: Westpac Banking Corporation (ASX: WBC) is the second largest bank in Australia in terms of the market capitalization (circa $100.33 Bn as of August 02, 2018). It offers general and savings banking services and provides investment portfolio management and advices, insurance services, consumer finance, and money market services and other services, etc. The Group reported profit growth of 7 per cent in 1HFY18 and the same amounted to $4,198 Mn as compared to the prior corresponding period (pcp). Revenue from ordinary activities stood at $18,968Mn, up 2.34% from the previous year. Diluted EPS came at 119.7 cents per share compared to 116.8 cps the last year. Net operating cash flow recorded $7,692 Mn compared to an outflow of $678 Mn in the prior corresponding period. According to the experts, the first-half cash earnings of the group were in line with expectations and the stock has a lot of potential to grow which leads to the positive sentiments in the market. Meanwhile, the share price has downgraded 7.03 per cent in the past six months as at August 01, 2018 and traded at reasonable PE level (11.93x) among its peer group. Hence, we maintain our “Buy” recommendation on the stock at the current market price of $29.190, considering its recent strategies which will support to improve the banking sentiments.


1HFY18 Financial Highlights (Source: Company Reports)
 

Commonwealth Bank of Australia

Reduced Mortgage Rate by 10 bps to Attract Borrowers: Commonwealth Bank of Australia (ASX: CBA) disclosed that the group, a substantial holder of the SINO Gas & Energy Holdings Limited, changed its substantial holding from 6.89 per cent of interest to 5.65 per cent of the voting power since August 01, 2018. As of now, the banking sector has started to reduce their mortgage rate to attract the borrowers amid nosediving of the credit growth. In the following race, CBA has also dropped down its fixed mortgage rates by 10 basis points on competition grounds. We expect that this strategy will help to raise customer base ahead. Meanwhile, CBA’spre-tax RoE was noted to be 10.8% in 1HFY18 which is better than many in the peer group and CBA has been able to gain traction based on efficiency to generate higher profit, strong balance sheet and capability to deliver returns for shareholders throughout the economic cycle. Hence, we maintain our “Buy” recommendation on the stock at the current market price of $ 73.680.

MyState Limited

Decent 1HFY18 Performance: MyState Limited (ASX: MYS) is a leading regional bank with the market capitalization of circa $438.9 Mn as of August 02, 2018. It accepts deposits and offers commercial, home, land, automobile loan and personal loans, and sponsors credit cards. The group reported decent first half-year performance wherein net interest income (NII) rose by 6.8 per cent in 1HFY18 and amounted to $46.4 Mn while net interest margin (NIM) was recorded broadly in line with the prior corresponding period. Additionally, the group has continued its above system credit growth with housing loan growth of 4.5 per cent on pcp basis and anticipates 2HFY18 will be higher than the first half as the group already received strong applications and settlement figures in the first month. Based on the first half, the group expects 2H18 to be much stronger than 1H18. The group lately enhanced its MD/CEO tenure.


1HFY18 Financial Highlights (Source: Company Reports)

Meanwhile, MYS stock has risen 5.42% in the past three months as on August 01, 2018 and trading at 8.0% under its 52-week high and 6.6% over its 52-week low. Hence, we maintain our “Hold” recommendation on the stock at the current price of $4.83, considering loan book growth and decent improvement in Net Interest Margin (NIM) & Net Interest Income (NII) in second half.

Bendigo and Adelaide Bank Limited

Improving Risk Weighted Capital Ratio: Bendigo and Adelaide Bank Limited (ASX: BEN) is mid-cap company with the market capitalization of circa 5.67 Bn as of August 02, 2018. The Group provides a broad range of banking and other financial services primarily to retail customers and small to medium sized businesses throughout Australia region. The group offers various services such as personal, business, and community banking, and wealth management services, etc. On the financial front, the group reported NPAT of $231.7 Mn for the half-year ended 31 December 2017, an increase of 10.86 per cent over 1HFY17. Revenue marginally grew by 0.71 per cent to $1,528.6 Mn in 1HFY18 as compared to the prior corresponding period. Net interest margin (NIM) expanded by 18 basis point to 2.36 per cent in 1HFY18 against 1HFY17. This was mainly due to repricing activity both in the lending and deposits portfolio.  BEN’s Common Equity Tier 1 capital ratio was 8.61 per cent on an APRA basis at 31 December 2017, up 34 basis points on 30 June 2017 and up 64 basis points on 31 December 2016. As of now, the stock is inching towards 52-week higher level. Hence, we give an “Expensive” recommendation on the stock at the market price of $ 11.390 (down by 2.232 per cent on August 02, 2018), ahead of full year result due on August 13, 2018.


Risk Weighted capital Ratio (Source: Company Reports)

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