Needle on Australia's financial sector; Latest with BOQ, NWL

  • Sep 03, 2019 AEST
  • Team Kalkine
Needle on Australia's financial sector; Latest with BOQ, NWL

Australia’s financial sector has been a major contributor to the economy with a substantial contribution to the GDP. Characterised by a sophisticated, competitive and profitable structure, the sector significantly contributes to the economic growth of the country. The four major banks operating in Australia’s financial sector namely, National Australia Bank, Australia and New Zealand Banking Group, Commonwealth Bank of Australia and Westpac Banking Corporation, are all ranked amongst the top 25 safest banks globally.

Now let us have a look at two players operating in Australia’s financial sector.

Bank of Queensland Limited

Bank of Queensland Limited (ASX: BOQ) provides financial services in Australia.

Leadership Transition Update: The bank recently updated that the employment of current interim Chief Executive Officer, Anthony Rose will end on 31 December 2019. The role of CEO will be transferred to George Frazis with his tenure commencing on 05 September 2019.

Dividend Distribution: The company recently released an announcement regarding payment of total dividend (fully franked) amounting to AUD 0.8284 per security. The shareholders will receive the dividend on 15 November 2019, and the record date is 31 October 2019.

Retirement of Director: In another recent announcement, the bank updated that David Willis, Non-Executive Director & Chairman of the Human Resources & Remuneration Committee, will retire from the Board on 10 December 2019. However, he will continue to serve as a non-executive director of its insurance subsidiaries, including St Andrew’s Insurance Pty Ltd, St Andrew’s Australia Services Pty Ltd and St Andrew’s Life Insurance Pty Ltd.

Appointment of Group Executive: Peter Sarantzouklis was appointed as the Group Executive of BOQ Business from 12 August 2019. He holds an extensive experience of 23 years in the banking and financial sectors.

Resignation of CFO following FY19 Results: The bank announced that Matt Baxby, CFO, will serve the current role until the release of full year results in October 2019. He was instrumental in acquiring Virgin Money from the Virgin Group in 2013.

Basel III Pillar 3 Disclosures for May Quarter: As at 31 May 2019, the bank had a Common Equity Tier 1 Capital Ratio of 8.9%, as compared to 9.3% as at 28 February 2019. The target range of common equity tier 1 ratio set by the bank is 8.25% to 9.5%. Total Capital Ratio as at 31 May 2019 stood at 12.3%, as compared to 12.7% as at 28 February 2019. Total Capital Ratio target set by the bank is in the range of 11.75% and 13.5%. The bank’s average liquidity coverage ratio over the May quarter was 141%, against the previous quarter average of 134%.

1HFY19 financial Results: During the half year ended 28 February 2019, revenue from ordinary activities amounted to $544 million, down 2% on pcp. Profit attributable to members amounted to $156 million, down 10% in comparison to the prior corresponding period. Cash earnings after tax were reported at $167 million, down 8% on prior corresponding period value of $182 million. The reduction in earnings during the period was due to lower income, higher loan impairment expense and higher operating expenses. Statutory profit after tax went down by 10% to $156 million, in comparison to pcp profit of $174 million. The basic earnings per share for the period stood at 41.8 cents, decreasing 10% in comparison to 46.5 cents in prior corresponding period. Dividend per ordinary share went down by 11%, from 38 cents in 1HFY18 to 34 cents in 1HFY19. Cash ROE for the period was reported at 8.8%, as compared to 9.9% in prior corresponding period.

Stock Performance: The stock generated negative returns of 1.52% and 1.74% over a period of 1 month and 3 months, respectively. Currently, the stock is trading at a market price of $9.095, up 0.497% on 03 September 2019 (AEST: 3:04 PM).

Netwealth Group Limited

Netwealth Group Limited (ASX: NWL) belongs to the financial sector providing financial services to financial intermediaries and investors, which include managed funds, investor directed portfolio services, a superannuation master fund.

Sale of 7.1 million shares by Heine Brothers: Recently, the company through a release dated 2nd September 2019 announced that Heine Brothers Pty Ltd as trustee for the MMH Trust had sold 7,100,000 shares in the Company, representing 3% of the issued shares if the company. It was also mentioned in the release that after the sale of share, the Heine family vest with the voting power of 60.66%.

A look at Financial Performance: In the FY19, the company reported a net profit after tax amounting to $36.0 million, reflecting a rise of 23.9% and its EBITDA witnessed a rise of $9.7 million to $52.0 million. The EBITDA margin of the company stood at 52.6%.  The company recorded total revenue amounting to $98.8 million, reflecting a rise of 18.6%, which has been driven by the continued strong growth in the fund under administration and increased transactional revenues and other ancillaries. The company has continued its strong cost management, scalability and represented further operating leverage in 2019. However, the company reported a rise in the total operating expenses to $46.8 million up 14.2% as compared to the previous corresponding period.

The funds under administration of the company stood at $23.3 billion, reflecting a rise of $5.4 billion, which is being comprised by the net inflows amounting to $4.3 billion and $1.1 billion of market movement. The company has led the market for FUA net inflows for the second consecutive year.

Dividend: A fully franked final dividend amounting to 6.6 cps was declared by the company. It takes the total dividend to 12.1 cps for the full-year 2019. The company will be paying the final dividend on 26th September 2019.

Outlook: For FY20, the company expects FUA net inflows amounting in excess of $7 billion and fund under administration in excess of $30 billion. The company would continue to review its pricing model for current and new business in order to ensure that it remains competitive while providing its clients value, quality service etc. It anticipates its EBITDA margin percentage to be slightly below FY19 primarily because of the overall decline in basis points from pricing strategies and new business weighted towards the affluent and HNW sector. The company further stated that it remains focused towards diversifying its revenue streams and building out the platform for providing optional functionality on a user-pay basis to further entrench its position as the leading technology provider.

Stock Performance: Moving to the past performance, the stock of Netwealth Group Limited last traded at A$7.650 per share with a drop of 0.907% on the trading session of 3 September 2019 (AEST: 3:04 pm). In the time frame of three months and six months, it witnessed a fall of 17.87% and 5.8%, respectively.  When it comes to the time period of one month, NWL provided a return of -3.38%.


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