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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

ANZ, NAB and Westpac: when do they report?

Three of the four big banks report their half-year results in the week ahead. The action kicks off with the ANZ reporting on May 1st, before the NAB reports on May 2nd, and Westpac reports on May 6th.

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The core themes: stories driving bank share prices

1. Australia housing market

The fall in Australian property prices has constrained bank shares for several years. Since the peak in the market in early-2017, banks share prices have broadly trended with falls in Australian property – particularly that of the key Sydney and Melbourne markets. Given this relationship, forecasts coming from ANZ, NAB and Westpac about the outlook for Australian property prices will be closely watched – especially as it relates to the banks’ top-line growth, as well as growth conditions in the broader economy.

2. Funding costs

A squeeze on net interest margins, driven by higher overseas funding costs, was a headwind for Australia’s banks at the end of 2018. This was largely driven by an increase in interest rates globally, fuelled by last year’s US Federal Reserve rate hikes. Since the beginning of 2019, global rates have fallen, as global central banks turn to a dovish bias in the face of weaker global growth. A level of interest in the banks’ results will be in how this dynamic may ease their funding pressures.

3. Credit growth

Tied to the fall in Australian property prices has been decreased consumer credit growth across the Australian economy. After the implementation by the Australian Prudential Regulatory Authority (APRA) of several “macro-prudential tools” designed to crack-down on investor lending in 2017, credit growth in the Australian economy has progressively diminished, weighing on the banks’ profitability, along with the nation’s economic activity. Investors will be keenly awaiting insights within the banks’ results regarding the prospects for future credit creation by the sector.

4. Regulatory and structural change

Following the climax of the Banking Royal Commission, out of which the big banks were seen to escape with little more than a slap on the wrist, bank stocks have broadly appreciated, due to easing concerns of an industry overhaul. Although major structural reforms, that would have likely disrupted the banks’ business models, look as though they won’t materialize, investors will be keeping an eye on updates from bank-heads about the various operational restructures each respective bank is undertaking.

5. Changes in government policy

It’s anticipated that Australia will have a new government come the next Federal election – which is incidentally only 2 weeks after ANZ, NAB and Westpac report. The Labor Party is odds on favourite to win the upcoming national poll and are taking to it a policy package of sweeping reforms to Australia’s franking credit system, and housing market. While the policies’ economic ramifications remain debateable, their impact have been negative for bank stocks, with commentary from bank leaders about these subjects to be closely watched.

In the numbers: the financial metrics to watch

Earnings per-share Net income Net interest margin Dividends per-share
ANZ $1.18 $3.48 billion 1.84% $0.82
NAB $1.09 $3.22 billion 1.83% $0.94
Westpac $0.98 $3.97 billion 2.09% $0.94

The key financial metrics paint a mixed picture for the big banks reporting this week. A consistent theme is net interest margins are expected to narrow across the board. But the profits and earnings outlook is a little more nuanced: profits and EPS for the ANZ and NAB are expected to grow modestly, however Westpac is expected to show a contraction in those measure. As it applies to dividends: ANZ is expected to increase them, Westpac is forecast to keep them steady, while NAB ought to cut their dividend payout.

Stock analyst price targets and recommendations

Buy Hold Sell Price target
ANZ 5 7 2 $27.99
NAB 9 6 1 $27.18
Westpac 6 6 4 $27.98

(Source: Bloomberg)

All three banks have traded at a discount to analyst price targets throughout the last half. That discount has recently narrowed, as more favourable global financial conditions, an easing in the slowdown in the Melbourne and Sydney property markets, and diminishing regulatory risks boost bank share prices. However, despite the improved outlook for Australian banks, the primary cause for the narrowed discount between consensus price targets and market prices has been a gradual trend of downward revisions of such targets by analysts, betraying a concern regarding the investment viability of the sector.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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