ANZ Banking Group (ANZ) is the nation’s third-largest bank by market capitalisation, and is among the top 50 banks in the world.

The group provides a variety of banking and financial products and services to around 8 million customers, and employs 48,000 people worldwide.

ANZ operates in Australia, New Zealand, Asia, the Pacific, the Middle East, Europe and America. In recent years the group’s strategy has shifted to become a super-regional bank. To this end, the bank is aiming for between 25-30% of its earnings to come from its Asia, Pacific, Europe and America Division (APEA) by 2017, with the major focus being the high growth Asian region.

China manufacturing in expansion mode

For much of the early part of 2012 the discussion surrounding China was whether it was heading for a hard landing or a soft landing. The fears of a hard landing abated by the end of 2012’s second half, helped by China’s central bank adopting an easing bias towards monetary policy.

Measures including lower interest rates and targeted fiscal stimulus appear to be flowing through to China’s manufacturing sector, which is beginning to expand after an extended period of contraction. Last month, the HSBC Flash PMI showed factory activity accelerated to a two year high in January.

A pickup in manufacturing activity is important for ANZ as it implies Chinese companies are taking advantage of easier credit conditions and borrowing money in order to expand.

What to look for in trading update

ANZ’s FY12 results revealed a 2.6% increase in FY12 cash profit to $5.75 billion.  The APEA strategy also continues to be a key driver for ANZ’s overall business.

In FY12 this region’s income comprised 21% of overall profit, putting the group on track to achieve its aim for APEA to contribute 25% – 30% of overall profit by 2017.

Today CBA reported a 6% on-year rise in 1H13 cash profit to $3.78 billion.  Impressively, the result came on the back of a 6% increase in revenue.

The group’s net interest margin rose 4 basis points from the previous half, in a sign wholesale funding pressures are easing for the four majors. CBA’s first half results are a healthy indicator for the industry, and we expect ANZ to announce a similarly positive result when it provides a trading update for the first quarter later this week.

Outlook

ANZ’s FY12 results provide it with a good base to tackle FY13, and we expect some good news in its first quarter trading update. We will look for an improvement in interest margin and asset quality, as well as a cash profit driven by good cost control and evidence of top line growth.

The group’s exposure to Asia will continue to be an important earnings driver, and the benefits of this leverage will translate to further share price appreciation in our view.

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ANZ Banking Group (ANZ) is the nation’s third-largest bank by market capitalisation, and is among the top 50 banks in the world.

The group provides a variety of banking and financial products and services to around 8 million customers, and employs 48,000 people worldwide. ANZ operates in Australia, New Zealand, Asia, the Pacific, the Middle East, Europe and America.

In recent years the group’s strategy has shifted to become a super-regional bank. To this end, the bank is aiming for between 25-30% of its earnings to come from its Asia, Pacific, Europe and America Division (APEA) by 2017, with the major focus being the high growth Asian region.

FY12 results

ANZ’s FY12 results were good without being great. The banking major recorded FY12 statutory profit of $5.7 billion, up 6% from the FY11 result.

An increased capital base saw EPS only rise by 2% year on year, to 213.4 cents a share. Dividend growth over the financial year managed to outpace inflation, with a 4% increase to 145 cents a share.

We were most impressed with direction of the group’s super-regional strategy.

 
As the above shows the group managed to grow the income from APEA by 5% over FY12 to 21%. Notably the group also managed to slow down operating expense growth in the region from 11% to 4%.

The group’s APEA strategy continues to be a key driver for ANZ’s overall business results and we think this will continue as the group strives for a contribution of 25% – 30% of overall profit by 2017.

China expanding again!

For much of the early part of 2012 the discussion surrounding China was whether the slowdown in growth would be a hard landing or a soft landing. The fears of a hard landing abated by the end of the second half, helped by China’s central bank adopting an easing bias towards monetary policy.

The central bank actually began its stimulus measures in December 2011 when it implemented the first of a series of reserve requirement ratio (RRR) cuts. After cutting the RRR by 1.5% the PBOC then cut the country’s official interest rate by a little over 0.5% in the months of June and July.

These stimulus measures have began to show signs of flowing through to China’s manufacturing sector, which was the cornerstones of the country’s explosive growth of the last 10 years.

The month of November saw the HSBC Flash Manufacturing Index return a reading of over 50 for the first time in 12-months, indicating the sector had returned to expansion. Every month since that return to expansion was followed by an increase in the index, with yesterday’s reading of 51.9 marking a 24-month high.

Outlook

ANZ’s FY12 results provide it with a good base to tackle FY13. The year was not an easy one for the global banks in general, with the eurozone crisis leading to higher funding costs, which increased pressure on bank interest margins.

ANZ’s net interest margin contracted 11 basis points over the year. That being said, it was the group’s exposure to Asia that allowed it to grow earnings.

We believe that ANZ’s leverage to the growing Asian region will continue to benefit the company and this is expected to result in further share price appreciation.

This article was distributed to our members on January 25th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only ANZ but all our current trading ideas. Simply click here and starting trading today.

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Commonwealth Bank (CBA) is the nation’s largest bank by market capitalisation, holds the greatest amount of deposits, the most home loans, and also controls a fair chunk of the wealth management market through Colonial First State.

The bank also operates Australia’s largest discount online brokerage operation, Commsec, as well as a multitude of international operations. Importantly, the bank has used its size to grow even bigger over the years. While many financial institutions collapsed over the global economic downturn – or neared collapse – CBA used its massive deposit base to maintain funding and buy depressed assets.

The banking giant also has diverse exposure geographically with stakes in several banks in the fast growing China.

1Q13 Trading Update

Despite facing slowing credit growth, CBA was still able to generate solid earnings growth in 1Q13. The group reported a 1Q13 statutory profit of $1.8 billion.

Unaudited cash profit, a measure more reflective of underlying performance, was $1.85 billion, a 5.7% increase on the prior corresponding quarter.

A breakdown of the results revealed net interest margins (NIM) were broadly stable in the quarter, relative to 2H12 NIM of 2.06%. The company noted that asset repricing impacts were largely offset by continued deposit pricing pressures.

The company’s’ trading income improved to a level consistent with the company’s long-term average run-rate, the result was also helped by a positive Credit Valuation Adjustment. CBA’s asset growth was mainly a function if of increased retail deposits, which now make up of 63% of the group’s total funding.

The Australian Retail division had a particularly good quarter, with improved lending margins, improved credit quality and good growth in customer numbers at its Bankwest subsidiary.

The Wealth Management and Insurance division produced solid volume growth, with Funds under Administration and Funds under Management growing by 6% and 4% respectively. Insurance premiums grew by 3%, with cross selling to the banks retail customer base showed signs of improved penetration.

With regards to CBA’s other division, the bank said most were trending at similar run rates to the 2H12.

Looking ahead

CBA’s quarterly update was solid, with a clearly improved tone from previous periods. Although the company did note slower revenue growth, it did increase profits by over 5%, this is an indication that the group has been able cut its expenses to cover for any reduction in revenue.

On a return on equity (ROE) basis, CBA does look attractive to its major rivals, with an average (ROE over the last three years of 17.6%, which is over 1% higher than any of its rivals.

Overall we expect a continuation of growth for CBA’s earnings in the current quarter, and this should hopefully translate into continued share price appreciation.

This article was distributed to our members on November 30th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Commonwealth Bank but all our current trading ideas. Simply click here and starting trading today.

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Macquarie Group (MQG) is Australia’s leading listed Investment bank and has offices all around the globe.

The company is well diversified with six different operating groups which include:

 

1H13 Results

Today MQG reported its 1H13 results with its first-half dividend and pre-tax profit beating market expectations. The company’s 1H13 net profit was $361 million, up 18% on the prior corresponding period. This actually missed consensus earnings by 3%.

Operating income dropped to $3.1 billion, a 5% fall on 1H12. What impressed was MQG’s ability to adjust for the loss of income with a 9% reduction in operating expense, showing its focus on cost savings.

Return on equity (ROE) increased from 5.7% in 1H12 to 6.6% in 1H13, highlighting a more profitable deployment of shareholder funds.

The group’s EPS grew by 22% on the prior corresponding half to $1.06. As the above shows, this is the company’s first half of positive EPS growth in more than five years and with think this could be the turnaround for the company’s fortunes.

Another item we found impressive with the results was the dividend payment. It climbed $0.10 from the 1H12 payment, to $0.75.

Outlook

MQG’s 1H13 results were impressive to say the least. Out of all the figures released today the numbers we liked the most were the reduction in operating expenses, the increased dividend payment, and the return to EPS growth.

All the above mentioned figures show us that MQG has turned a corner and we believe this will lead to continued share price appreciation.

This article was distributed to our members on October 25th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Macquarie but all our current trading ideas. Simply click here and starting trading today.

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Commonwealth Bank (CBA) is the nation’s largest bank by market capitalisation, holds the greatest amount of deposits, the most home loans, and also controls a fair chunk of the wealth management market through Colonial First State.

The financial stock also operates Australia’s largest discount online brokerage operation, Commsec, as well as a multitude of international operations.

Importantly, the bank has used its size to grow even bigger over the years. While many financial institutions collapsed over the global economic downturn – or neared collapse – CBA used its massive deposit base to maintain funding and buy depressed assets.

The banking giant also has diverse exposure geographically with stakes in several banks in the fast growing China.

3^rd Quarter Trading Update

CBA last month reported a third quarter unaudited cash profit of $1.75 billion, a 2.9% increase on the prior corresponding quarter.

The results come after the company had a record first half cash profit of $3,576 million, which was a 7% jump on the prior year.

The group warned not only in its first half update, but also in its March quarter update, that higher funding costs have reduced its margins.

However the updates from the bank covered periods before the RBA cut the official cash rate twice for a total of 75 basis points.

CBA only passed 61 points of these cut, we believe that these should help alleviate some of banks margin pressures.

Aussie Banks

Last week Moody’s downgraded 15 major global banks, with Bank of America, Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley also receiving at least a one notch cut its long-term debt rating.  Credit Suisse was downgraded three full notches.

Spanish and Brazilian banks recently had their ratings cut with Spain obviously suffering major downgrades after the government had to borrow money to keep the banks adequately capitalised.

However the Australian banks continue to be rated amongst the highest in the world, all four remain within their AA credit rating band.

Moody’s said that our banks “don’t engage in capital markets business and in particular higher-risk activities, like proprietary trading. They are focused on traditional lending for residential mortgages and the corporate sector.”

With the Australian banks in such good condition, and some of the last few AA rated banks globally, they are in a better position than most to borrow funds from wholesale markets.

Looking ahead

CBA said in its quarterly update that it is in a strong position, which continues to enable them to take a long term view of business. This is important as the bank continues to expand its presence in the growing Asian region.

We believe that the bank’s worries of higher funding costs would have subsided or at least eased with the two consecutive rate cuts by RBA.

The bank also remains one of the most attractive of the big four banks, with an average return on equity (ROE) over the last three years of 17.4%, a full 2% higher than any of its rivals.

With three quarters of its fiscal year completed, CBA is on track to be the first Australian bank to make a profit on over $7 billion and we look forward to seeing CBA’s continued success translate into continued gains for its share price.

 

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Perpetual Limited is a financial services company that has two primary activities, wealth management services and corporate trust services.

The Company provides funds management, responsible entity services, trustee services, executor services, financial planning, investment administration, superannuation, custody and registry services. The group is listed on the Australian Stock Exchange and is a member of the S&P/ASX 200

Perpetual shares soared today after rumours emerged that a private equity firm is preparing to approach the asset manager with a takeover offer around $30 a share.

The company has said “Perpetual is not aware of any information relevant to the article and has no reason to believe that the article is anything other than mere speculation.”

If there is an offer it will be the second in two years. The company rejected an offer from private equity firm KKR in 2012 of $38-$40 a share.

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Westfield Retail Trust (WRT) is a real estate investment trust, with an interest in 54 major shopping centres across Australia and New Zealand.

 

The asset portfolio is owned in a 50/50 joint venture with Westfield Group (WDC).

WRT was spun out of Westfield Group in late 2010 as the latter sought to recapitalise its balance sheet.

Solid March quarter

The quality of WRT’s property portfolio was evidenced in a recent presentation that revealed occupancy rates were above 99.5% at the end of the March quarter.

In the first three months of the year, comparable sales at WRT’s mini major tenants (including brands such as Zara and Apple) grew a healthy 4.3%, helping to compensate for a 1% fall among its major tenants.

Moreover, specialty store sales were up 1.2% in the year to March 31^st, 2012, this despite a challenging environment for retailers.

On a per square metre basis, WRT recorded $9,765 of sales in Australia and NZ$8,202 of sales in New Zealand.

The group outperformed its peers on these metrics over the March quarter, with GPT Group logging $8,976 in sales per square metre, and Stockland Group’s occupancy rates averaging 95%.

Future growth potential

WRT’s flagship Sydney asset (Westfield Sydney), which includes food retail and a top end luxury retail precinct, was only recently developed but is expected to be a major income contributor going forward.

This is based on the likelihood of Westfield Sydney generating high occupancy sales relative to occupancy costs.

Westfield Fountain Gate is the group’s other major expansion project in Melbourne and is expected to be completed later this year.

Fountain Gate’s expansion will encompass a new format Coles supermarket as well as over 50 retailers.

Outlook

We don’t believe WRT’s outperformance is properly reflected in the share price. The group’s net asset value (NAV) is $3.26 per unit, so it appears to be trading a fairly steep discount.

Moreover, WRT guided for full year earnings/distribution guidance of 18.75 cents per security (WRT pays all of its earnings out as distributions).

This implies a healthy yield of 6.8%, which is something we think will be an attraction for income seeking investors.

WRT is also backed by a solid balance sheet and had a gearing ratio of just 21% at the end of FY11.

As such we think WRT is a stock to watch in the near-term.

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Commonwealth Bank of Australia provides banking, life insurance and related services for individuals, small businesses and medium sized commercial enterprises.

The Bank provides corporate and general banking, international financing, institutional banking and stock broking and funds management such as superannuation product.

Financial Stock CBA reported a $1.75 billion cash profit in the third quarter, a 3% rise from the prior corresponding period.

The bank did note that subdued credit demand and high funding costs continued to eat into its profit margins.

CEO Ian Narev said in a statement “consistent with the uncertain outlook that we indicated in the Group’s half-year results in February, we have retained our conservative business settings, including tight expense control, a conservative funding profile and strong provisioning levels”

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Stockland is a property trust which invests and manages in retail and commercial properties in Australia and is a member of the S&P/ASX 200.

The Group also provides property development and management services, hotel management services and other related services including financing.

Stockland downgraded its annual earnings guidance from 31.6 cents to 30.5 cents per stapled security.

The company is blaming deterioration in the residential housing market and wet weather.

CEO Matthew Quinn said “the recovery is likely to be slow unless we see a reduction in bank interest rates to improve affordability and buyer confidence.”

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Stockland is a property trust which invests and manages in retail and commercial properties in Australia and is a member of the S&P/ASX 200.

The Group also provides property development and management services, hotel management services and other related services including financing.

Stockland group announced today that it will extend its on-market share buy-back to as much as 10% of issued capital, as it seeks to increase return via capital management.

The company also revealed that it had entered into an agreement to sell its 55% stake in the Moorebank Industrial Property trust to Qube logistics for $123 million.

CEO John Schroder said the sale supported Stockland’s strategy to reweight its commercial property portfolio when assets are no longer in line with the company’s strategy.

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