The Bull

Wednesday 15

August, 2018 3:19 PM



Commission looms on banks reporting season

Commission looms on banks reporting season

Customers may want a response to the scandals heard by the royal commission but markets will be watching Westpac's costs and loan book at its half-year results.

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By AAP 30.04.2018 03:17 PM

Major banks will post results this week and while customers will be keen for a response to scandals exposed by the royal commission, analysts will be watching how institutions respond to revenue headwinds and the state of Westpac's mortgage book.

ANZ and NAB post half-year results this week, with costs likely to occupy analysts poring over their results for the six months to March 31.

Westpac reports a week later - in the wake of the share price drubbing induced by a UBS report last week that questioned the state of its mortgage book following documents released by the royal commission.

With the margin benefits of recent mortgage repricing fading, there could also be commentary from the trio over their possible responses to the banking regulator's announcement last week that it has removed its cap on lending to property investors.

ANZ will report on Tuesday and has already prepared the market for a result muddied by divestments and one-off costs by releasing a six-page guide detailing various large items.

Notable was a $632 million loss from the divestment of two wealth businesses, and there will also be a big jump in restructuring costs to about $80 million and $16 million of costs related to the royal commission.

Citi analyst Brendan Sproules expects cash earnings from continuing operations to rise 2.5 per cent to $3.449 billion.

"Divestments will likely add noise, but the focus will be on ANZ's underlying cost growth," said Mr Sproule, who has cut his full-year continuing operations profit forecast five per cent to $6.889 billion.

Financial stocks on the ASX have fallen about six per cent since mid-March, when the royal commission started hearings into consumer lending, and the sector has been further spooked by the fee-for-no-advice scandal enveloping AMP.

Some analysts believe the selloff has been overdone and Mr Sproules rates both ANZ and National Australia Bank, which reports on Thursday, as a "buy" at their current valuations.

Investors will be looking for commentary from NAB on the progress of its ongoing restructuring program and for any updates on projected cost savings.

With Commonwealth Bank operating on a different financial calendar to its rivals, Westpac winds up the reporting next Monday under pressure to offer further reassurance over the state of its mortgage book.

Westpac shares plunged to a two-year low last week after investment bank UBS cut the stock to a "sell" rating following analysis of internal documents released by the royal commission.

UBS banking analyst Jonathan Mott said there were questions over the quality of Westpac's $400 billion mortgage book because of poorly assessed loans.

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