How Is The Needle Moving On Banks’ Upcoming Results - View from Market Experts?

Three of Australia’s biggest banks - National Australia Bank (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) are expected to release their first-half results in the coming days, while Commonwealth Bank of Australia (ASX: CBA) is due to release its quarterly earnings by 8 May 2019. CBA has already released its first-half results in February 2019.

The real picture of the post-royal commission banking environment will be uncovered this week with the announcement of major banks’ results.

The anticipation over the banks’ results is not so favourable, post the royal commission enquiry disclosing the delay in customer compensation payments by banks.

The analysts expect that NAB will be forced to cut its dividend, as high remediation and regulatory costs are constraining the bank from automating parts of its business. NAB is projected to deliver a cash profit of $3.1 billion.

On Macquarie’s numbers, NAB has witnessed a credit growth of 1.5 per cent. Despite the strong credit growth, the bank is expected to give weaker revenue trends. UBS and Macquarie expect a dividend cut to 80 cents per share for NAB. The payout ratio is also likely to be reduced to 80 percent of earnings. UBS expects that $500 million will be paid as compensation in the second half.

NAB’s dividend has stayed at 99 cents since 2014. However, expected increases in remediation provisions and an increase in regulatory capital requirements in New Zealand are pushing NAB’s core capital, resulting in the dividend cut.

The market expects ANZ results to be the most kind out of the three. UBS has predicted a cash profit of $3.4 billion for ANZ, down by 1.7 per cent. As per the UBS’ projections, the worst is over for the ANZ as it is undergoing a business simplification process. It has planned in advance to reduce its operations and the divested businesses have insignificant impacts on cash profit.

Prospects over dividends seems to be strengthened as ANZ is likely to absorb any undistributed capital, from the sale proceeds worth $3.8 billion of its life insurance and wealth management arms.

ANZ results would be unmissable for its lending volumes, as per experts as the bank thinks beyond the controversial household expenditure method (HEM) to evaluate customers' ability to repay their loans.

Westpac Banking Corp is predicted to post a cash profit of A$3.5 billion, a 17% decline due to high regulatory and remediation charges. There would be a close monitoring on bank’s consumer and auto loans.

Westpac is still under question for the fees-for-no-service scandal and speculation mounts to compensation of $1 billion to be paid against this charge. The bank was under the scanner during royal commission hearings as it was unable to quantify the fees (charged inappropriately) to be repaid to customers due to poor record keeping.

Australian banks have already been accounted for over AUD 6 billion in remediation costs, and analysts believe that another set of liability might be implied on them, for illegally charging fees without providing services.

Stock performance as on 29 April 2019

The stock of NAB last traded at A$25.440, down by 0.896% while WBC at A$27.580, slipping by 0.577% as on 29 April 2019.

ANZ’s stock closed at a price of A$27.330, falling by 0.255% compared to its last day’s price. CBA’s shares settled the day’s trading at A$75.110, down by 0.451% from the last days’ closing price.


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