Summary

  • The banking sector stepped up and backed customers with liquidity facilities and mortgage deferrals amid COVID-19.
  • While WBC has lately reduced merchant fees to 0.6% on contactless debit transactions, ANZ reported a fall in its profits for 1H20 period ended 31 March.
  • The operations of Motor Trade Finance, Geneva Finance and AMP Limited got affected due to the impact of coronavirus amid uncertainty and market volatility.

Banking sector leads the New Zealand financial system, with banking assets responsible for a very high proportion of the overall assets of the financial structure. The banking system consists of a bulk of lending to New Zealand's non-financial private sector. External capital market finance (issue of corporate bonds) and non-bank lending institutions (NBLIs) in combination account for just 6% of the private sector non-financial borrowing.

Coronavirus outbreak has resulted in massive economic hardships for consumers, businesses, and communities around the world. The financial sector has helped companies and households by solid market continuity agreements, housing for many customers through the reform in credit conditions along with just slight tightening of lending standards.

Let's now look at few banking and financial stocks in the NZ market.

Westpac Banking Group

Shares of Westpac Banking Corporation (NZX:WBC) settled the trading session at $18.04 on 7 August, down 1.37% from the last close.

Westpac NZ recently lowered the merchant fee pricing mechanism that will result in cost reductions for more than 10,000 small and medium-sized Kiwi companies and will make contactless purchases more readily accessible to consumers. The Bank plans to move more businesses to the new blended merchant service fee that would offer separated pricing that will be subject to transaction form.

Merchants will be charged a new maximum rate of 0.6% on contactless debit transactions. The new changes will make contactless sales more accessible to merchants.

Australia and New Zealand Banking Group Limited

Australia and New Zealand Banking Group Limited (NZX:ANZ) shares ended the market session at $19.05, as on 7 August, declining by 0.26% from the last close.

The Bank delivered interim result on 30 April 2020 for the period closed 31 March wherein it mentioned statutory PAT and cash profit fell by 51% and 61%, respectively on pcp to stand at $1545 million and $1413 million, respectively signifying the effect of COVID-19 on the Bank's operations.

However, ANZ entered the crisis with a solid capital position with Tier 1 Capital Ratio of 10.8% at 31 March 2020. The Bank also postponed its decision on 2020 interim dividend until they gain a better transparency about the effect of pandemic.

Motor Trade Finance Limited

Motor Trade Finance Ltd (NZX:MTF) is a dealer-owned finance entity, providing vehicle finance and other financial services to the customers.

MTF’s half-year financial results ended 31 March 2020 were encouraging, amid coronavirus uncertainty. Some of the highlights from the same are as follows:

  • Sales for 6 months period rose by 4.7% to $12 million on previous corresponding period (pcp).
  • Profit after tax fell 37% to $2.7 million, while underlying profit after tax remained steady with a fall of 1.5% to $3.86 million.
  • Return on ordinary equity, using underlying profit after tax was 11.9%, down by 12.5% for the same period last year.
  • The total interim dividends for the year were noted at 2 cents per share (31 March 2019: 4 cents)

The Board decided to postpone dividend distributions to ordinary stakeholders and planned to review them at the end of the 2020 financial year, as a part of cautionary resolution to coronavirus.

On 27 July, MTF notified the market that Mark Darrow was appointed by the Motor Trade Finance Board as an independent director.

Geneva Finance Limited

Geneva Finance Limited (NZX:GFL) was formed in 2002 with the objective of giving personal loans, hire purchase finance, motor vehicle finance, home loans, insurance and commercial finance to SMEs. Shares of GFL last traded at $0.430, up by 1.18% from its previous close, as on 7 August.

On a positive side, as per GFL full year report ended 31 March 2020, released on 29 June a solid profit growth of 30% was attained in Quest Insurance. The Investment in the Tonga finance operation was up 22%, and consumer debt collection operation increased 468%. However, it was offset by decreased contributions from Geneva Financial Services (GFSL), business debt litigation operation (MFL) and the effect of COVID-19 overlay provision on GFL's receivables ledger.

Other highlights from the annual report are as following:

  • Continuity in the growth of Quest premium (subsidiary of GFL) sales and rose by 34% to $14 million.
  • Group revenue increased by 14% to $31 million and total group assets rose by 6% to $124.9 million.
  • Operating costs rose by 25.8% to $15.9 million, largely as a result of higher lending acquisition costs incurred and costs associated, with the increased insurance premiums sold.
  • The after-tax profit attributable to Group was $3 million down $1.1 million (22.3%).

On 10 July, the Board announced a final dividend of 1.50 cents per share for period ended 31 March 2020.

AMP Limited

AMP Limited (NZX:AMP) is a financial services company providing superannuation, investment products, insurance, and other financial services. Shares of AMP settled the day at $1.53, decreasing by 1.29% from its previous close, on 7 August.

As per a trading update dated 31 July, AMP expects to report an underlying profit for its retained businesses between $140-150 million, with results affected by market volatility and a credit loss provision in AMP Bank. AMP stays committed to delivering $300 million of annual run-rate cost savings and transformation investment of $1-1.3 billion even after the pace of investment spending being affected by COVID-19.

Further, AMP also completed the sale of AMP Life, simplifying the portfolio, freeing up capital and supplying a fundamental component of its transformative strategy. The remediation program for AMP is still on track and is expected to be completed 80% by the end of FY 20.

On 6 August, AMP announced that Alex Wade, CEO of AMP Australia stepped down from his role and Blair Vernon, CEO of New Zealand Wealth Management (NZWM) took over as Acting CEO of AMP Australia.

 

 


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