Would 4 NZX financial stocks be impacted by high inflation?

Highlights

• Financial companies may do well, as per market reports, during the time of high inflation.
• ANZ is facing reports of security violations.
• Tower announced the appointment of new CFO, Paul Johnston.

New Zealand Monday reported a 2.2% surge in CPI in the September quarter of 2021. The number surpassed expectations and soared at the fastest rate in 10 years, propelled by housing-related costs and other supply limitations.

The annual inflation stood at 4.9% in the third quarter, sitting almost 2% above the highest target band of the RBNZ. Experts suggest that the inflation data may force the RBNZ to raise the OCR by 50 bps to 1% in the next meeting, making it deviate from its strategy of increasing interest rates in small steps.

Market reports suggest that higher-than-expected inflation and interest rates may benefit financial sector companies, such as payment firms and banks. Higher prices due to inflation raise the demand for credit, subsequently increasing interest rates that benefit lenders.

Let’s skim through how these financial stocks are performing amid high inflation.

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Barramundi Limited (NZX:BRM)

Barramundi announced on Monday that it intended to continue buying back its ordinary shares in accordance with section 65 of the Companies Act 1993. The buyback will be for 12 months, beginning from 1 November 2020 to 31 October 2022.

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The buyback programme will allow the purchase of up to 5% of ordinary shares on issuance. BRM will only buy back if the discount to the last published net asset value is more than 8%.

BRM ended the day 1% in green to close at $1.01.

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

ANZ has appointed external auditors after the bank faced security breaches, as per market reports. There are speculations making rounds that the bank is battling to hold on to security as its technology gets older.

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The bank also confirmed on 11 October that Farhan Faruqui had begun his term as the Chief Financial Officer.

ANZ ended the day 0.07% in red to close at $29.54.

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

Westpac announced on 12 October that owing to noteworthy items, its reported cash earnings, and the net profit for the second half of 2021 will be reduced by $1.3 billion.

RELATED READ: How are 5 NZX financial stocks faring amid economic recovery?

These items include a $956-million one-time charge against the profit due to a lower earnings prospect in its institutional banking sector, as well as other remediation expenses.

WBC ended the day 0.04% in red to close at $26.78.

Tower Limited (NZX:TWR)

On 18 October, Tower announced the appointment of Paul Johnston as the Chief Financial Officer. He is serving as the CFO and Director for the Far East region of Chubb, the world’s largest publicly traded property and casualty insurance company.

RELATED READ: How are NZ banks faring in October post OCR increase?

Mr Johnston will join Tower in January and will replace the Company’s CFO, Jeff Wright, who will end his tenure on 31 December 2021.

TWR ended the day flat at $0.64.

Bottom Line

It is yet to be seen how the percentage changes in the interest rate and inflation numbers fare for financial companies.

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