Market View on Major Banking Stocks: NAB, CBA, ANZ, WBC

  • Nov 26, 2019 AEDT
  • Team Kalkine
Market View on Major Banking Stocks: NAB, CBA, ANZ, WBC

Sustained and super-GDP asset growth and leverage along with efficiency gains from technology resulted in growth and value creation in Australian banking space. Several business lines are closing in the country, so it is important for the banks to make disciplined, hard choices in determining where to finance its capital and to make more radical business choices. The banking sector in Australia may have shunned the situation of financial crisis but it won’t be easier for the banks to avoid the economic downturn the country is about to face.

Let us have a look on major banking stocks!

National Australian Bank Limited (ASX: NAB)

National Australian Bank Limited (ASX: NAB) provides banking, leasing, housing and general finance, global and investment banking and such services.

Divisional Highlights:

The company has recently shared its supplementary information wherein it stated a decrease in net profit for the period to $4,801 million from $5,557 million. The Group’s reportable segments are business units engaged in providing either different products or services, or similar products and services in different geographical areas.

As per the company reports, New Zealand Banking showed an improvement over last year and went up to $997 million from $922 million, while the other divisions declined slightly on the previous period. As at 30 September 2019, the Group remained well capitalised with a Group Common Equity Tier 1 (CET1) ratio of 10.38% and continued to strengthen its technology environment to be fast, agile, efficient, resilient and relevant, supported by deep technical expertise.

Divisional Performance (Source: Company’s Report)

Settlement of Class Action and payment of Dividends:

NAB has agreed to settle class action brought by Slater & Gordon, involving a payment of $49.5 million in relation to sale of two Consumer Credit Insurance products- NAB Credit Card Cover and NAB Personal Loan Cover. The company has declared to pay a dividend of 83 cents on ordinary fully paid shares on December 12, 2019.

On 26 November 2019, the stock of NAB was trading at $26.23, up by 0.575% (at AEST 1:12 PM). The stock gave a return of 10.37% on the YTD basis. As on 26 November 2019, the market capitalisation of the company was at $75.19 billion. In terms of valuation, the stock is trading at a P/E multiple of 15.200x and is earning a dividend yield of 6.37%.

Commonwealth Bank of Australia (ASX: CBA)

Commonwealth Bank of Australia (ASX: CBA) is engaged in retail and commercial banking and provides services like home loans, consumer finance, business and private banking services, institutional banking and fund management.

Dividend/Distribution – CBAPI and issue of CommBank PERLS XII Capital Notes:

CBA announced a distribution/dividend of 91.88 cents on CBAPI - Capital Notes Deferred Settlement to be paid on March 16, next year. The bank also confirmed that 16,500,000 CommBank PERLS XII Capital Notes were issued at the application price of $100 each, raising $1.65 billion.

Basel iii Pillar Report and financial highlights:

The company has recently issued its Basel iii pillar report wherein it stated Equity Tier 1 (CET1) was 10.6%, Tier 1 ratio stood at 12.5% and Total Capital ratios stood at 16.1%. During the year, leverage ratio of the company stood at 5.5% at 30 September 2019 on an APRA basis and 6.4% on an internationally comparable basis. In the first quarter of 2020, Net interest income increased by 3%, boosted by volume growth in home lending, business lending and household deposits. During the quarter, the company reported a customer deposit funding at 69%, resulting in solid funding and liquidity position with an average tenor of the long-term wholesale funding portfolio at 5.4 years.

On 26 November 2019, the stock of CBA was trading at $80.43, up by 0.676% (at AEST 1:15 PM). The Stock gave a return of 12.57% on the YTD basis and is inclined towards its 52-week high level of $83.990. As on 26 November 2019, the market capitalisation of the company was at $141.42 billion. In terms of valuation, the stock is trading at a P/E multiple of 16.450x and is earning a dividend yield of 5.39%.

Australia and New Zealand Banking Group Limited (ASX: ANZ)

Australia and New Zealand Banking Group Limited (ASX: ANZ) provides banking and financial products and services to individual and business customers.

Issue of Euro 1,000,000,000 1.125% Subordinated Notes:

The bank announced that it will issue Euro 1,000,000,000 subordinated notes to its US$60 billion Euro Medium Term Note Programme at 1.125% payable annually in arrears. ANZ also announced that ANZEST Pty Ltd intends to purchase on-market shares of approximately $125 million in November and December 2019.

Financial Highlights:

For the financial year ended 30 June 2019, the company earned a cash profit of $6.5 billion. Despite the challenging conditions in 2019, the bank declared a FY19 full year dividend of 160 cents with the final dividend of 80 cents franked at 70%. In the current year, ANZ arranged bonds for both Australia’s National Housing Finance and Investment Corporation and Housing New Zealand Corporation with an intention to increase access and availability of social and affordable housing on both sides of the Tasman.

On 26 November 2019, the stock of ANZ was trading at $24.905, up by 0.302% (at AEST 1:18 PM). The stock gave a return of 4.07% on the YTD basis. As on 26 November 2019, the market capitalisation of the company was at $70.38 billion. In terms of valuation, the stock is trading at a P/E multiple of 11.820x and is earning a dividend yield of 6.44%.

Westpac Banking Corporation (ASX: WBC)

Westpac Banking Corporation (ASX: WBC) provides financial services like lending, deposit taking, payment services, investment platforms, fund management etc.

Westpac Response Plan Expenses:

Westpac responded to the issues raised by AUSTRAC by Response Plan, which made a number of commitments including to improve its financial crime program and support industry initiatives to enhance financial crime monitoring. The bank estimates these commitments will increase expenses by up to $80 million in FY20.

Financial Highlights:

For the year ended 30 September 2019, Westpac has announced a fully franked final ordinary dividend of 80 cents per Westpac ordinary share, totalling approximately $2,791 million, which will be paid on 20 December 2019. During the time span from FY15 to FY19, net interest income went up from $14,267 million to $16,907 million, but Net profit attributable to owners went down to $6,784 million from $8,012 million. During the year, Group net interest margin stood at 2.12%, down from 1bps from prior year.

Five Year Financial Summary (Source: Company’s Report)

On 26 November 2019, the stock of WBC was trading at $24.880, up by 1.8% (at AEST 1:21 PM). The stock gave a return of -5.82% in the last 12 months period. As on 26 November 2019, the market capitalisation of the company was at $87.22 billion. In terms of valuation, the stock is trading at a P/E multiple of 12.440x and is earning a dividend yield of 7.12%.


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