3 NZX banking stocks that can be looked at amid inflation- WBC, ANZ, HGH

Highlights 

• Inflation numbers are accelerating globally.
• ANZ expects that rising rates and changes in deposit pricing are likely to moderate these headwinds in Q2.
• Westpac reduced its 2021 final dividend payment by 50bps.

Inflation numbers are accelerating globally. Increased demand, surging freight rates, shipping backlogs and Omicron-related restrictions are the major causes behind high inflation numbers. Subsequently, growth is slowing down as various economies are battling with high inflation, supply congestion and continued uncertainty.

NZ’s inflation jumped to 5.9% at the end of December 2021, the highest since June 1990. Stats NZ data released on Thursday showed that cost of living for an average Kiwi household was 5.2% higher for 3 months ended 31 December 2021 compared to same period in 2020.

The RBNZ has a target to keep the inflation between 1% and 3% in the medium term keeping the future average inflation rate near the 2% target midpoint.

On this note, let’s look at how these 3 NZ banking stocks are doing this month.

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

On 7 February, ANZ reported softer revenue in its markets in October 2021 due to the trading environment. However, its revenue numbers followed FY21 trends in subsequent months.

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ANZ’s margins fell 8bps for the quarter ended 31 December 2021 due to a lower exit rate and structural interruptions. Rising rates and changes in deposit pricing are likely to moderate these headwinds in Q2.

ANZ ended the day 0.58% in green to close at $29.67.

Westpac Banking Corporation Limited (NZX:WBC, ASX:WBC)

Westpac released its Pillar 3 report on 3 February 2022. The Group reported that its CET1 capital ratio dropped by 12 bps compared to the number on 30 September 2021 to 12.2% on 31 December 2021.

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It also reduced its 2021 final dividend payment by 50bps. However, Westpac reported a 35bps rise in its Q1 FY22 cash earnings.

WBC ended the day flat to close at $24.05.

Heartland Group Holdings Limited (NZX:HGH; ASX:HGH)

Heartland reported an NPAT of $87 million with an asset flow witnessing a growth rate of 8% in FY21. Fitch has given a long-term rating of BBB to HGH while revising the outlook to stable from negative. Better outlook expectations came at the back of lower downside risk related to NZ economic prospects.

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HGH expects a profit in the range of $93 million-$96 million in the year ahead. On 22 February, HGH is due to release its interim results for the 6 months ended 31 December 2021.

HGH ended the day 0.41% in red to close at $2.44.

Bottom Line

The RBNZ is likely to increase the OCR to lower inflation and is due to release its monetary policy update on 23 February 2022. However, increased interest rates and inflation can lead to increased debt service costs for homeowners.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)