Netwealth (ASX:NWL) updates FY22 guidance, ups FUA for FY23

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Highlights

  • Netwealth Group has revised its FY22 guidance after the RBA rate hike.
  • Netwealth sees margin reduction and a drop in net inflows due to the current market scenario.
  • NWL share price is down 0.95% in the early hours of trade on ASX today (5 May).

Financial services company Netwealth Group Limited (ASX:NWL) has released an update on platform cash account rate changes and its future outlook for net inflows on the ASX today (5 May 2022).

The update is a result of RBA's 25 bps rate increase, announced on Tuesday. This has changed Netwealth's margin on cash to 75bps now. Also, Netwealth downgraded its net inflows guidance by AU$0.5 billion for FY22. While in the last March quarter update, NWL had forecasted net inflows to be AU$ 13.5 billion, it is now being anticipated as only AU13 billion.

Why has Netwealth downgraded its FY22 inflows outlook?

In its March quarter update released on 14 April, the wealth management platform had anticipated its FY22-FUA (Funds Under Administration) net inflows guidance to cross AU$13.5 billion. The expectation was based on the March quarter net inflows worth AU$2.6 billion and the then existing market conditions.

However, Net inflows in April, as reported in today's ASX release, were just AU$790 million, which is marginally below Netwealth's expectation. The reduced inflows are reportedly a result of volatile markets, Covid related absenteeism, geopolitical events and interest rate speculation.

While Netwealth still is hopeful of May and June month inflows due to seasonal factors, the company has downgraded its FY22 net inflows to just AU$13 billion now. Other than the above-mentioned influencing factors, a notable one is the interest payable amount by Netwealth. Post-Tuesday's RBA rate hike of 25 basis points, Netwealth's margin is expected to be about 1.2%, which is a reduction from its previous rate of about 1.45 per cent, pre-COVID-19.

How is RBA rate hike affecting Netwealth?

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  • The RBA's latest interest rate hike of 25bps impacts Netwealth's interest payable to ANZ on its cash transaction accounts for its Superannuation Master Fund and Wrap Services.
  • The interest rate payable shall now be based on an RBA cash rate less 0.65%, which is an increase of 0.15%.
  • Also, due to the RBA rate hike, Netwealth's cash margin is now around 75bps, and its margin is 1.20% which is 0.25% below its pre-Covid margin.

Has Netwealth’s outlook changed for FY23?

While its FY22 net inflows guidance has been downgraded, Netwealth Group is still hopeful of the FY23 FUA numbers. Given the fact that its business is undergoing a transition of clients. Netwealth is also anticipating its new business pipeline to be supportive of growth in FY23 and later.

NWL share price performance

  • On the ASX, as of date, shares of Netwealth Group Limited trade at a market capitalisation of AU$3.06 billion.
  • NWL share price trades in the 52-week range of AU$12.600 to AU$12.690 a share, with an average trade volume of over 350 thousand shares.
  • Today, the NWL share price is down about 0.954% on the previous close, trading at AU$12.450 a share on the ASX (10:14 AM AEST).
  • In the last five days of trade on the ASX, NWL shares have lost over 4.37% of their pricing while being 12.05% down for a month. 
  • In terms of distributions, as of date, Netwealth Group Limited's last dividend payment of AU$0.100 a share was made on 24 March 2022. The dividend was fully-franked, and shares are trading ex-dividend as of date.

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