Equity Strategy
Bank Reporting Season: Less Macro, More Micro
Thu 28th October, 2021

Major bank reporting season gets underway this week. We see FY21 results as being more about stock-specific issues rather than being driven by macro factors that have dominated recent results. As the sector has performed well in the lead-up to reporting, investors' expectations for the results have been raised.

Recent results from Bendigo and Adelaide Bank (BEN), Bank of Queensland (BOQ), and Commonwealth Bank of Australia (CBA) were accompanied by share price sell-offs as challenges on net interest margins and higher costs weighed on the outlook. The market appears to have factored in both lower margins and higher costs for FY21E, but there is some risk that FY22E cost assumptions could be too low across consensus.

Low bad debts and capital management are well understood by investors.

Westpac (WBC) will be the key focus bank for capital management and any process update on the cost program. We look for an off-market buyback program in the range of $4.0-4.5bn.

The Wilsons Australian Equity Focus List is currently market weighting the major banks. Absolute valuations look expensive, offset by more attractive relative valuations and prospects for earnings normalisation post-COVID-19. Our order of preference across the majors is WBC, National Australia Bank (NAB) and Australia New Zealand Banking Group (ANZ). In this week’s report we cover:

  • The four key themes dominating bank results season
  • Results previews
  • Our view on the sector

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Written by

John Lockton , Australian Equities

John is a leading investment strategist with 20 years experience.

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