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Australian Bank Earnings

With bank stocks making up a sizeable portion of Australia’s sharemarket, the country’s big four banks – CBA, WBC, ANZ and NAB – tend to be some of the most heavily scrutinised stocks every earnings season.

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Start trading today. Call 1800 601 799 or email newaccounts.au@ig.com. We’re here 24 hours a day, except from 7am to 5pm Saturdays (AEST).

Contact us: 1800 601 799

CBA, NAB, ANZ, and WBC shares outlook - everything you need to know

Bank

Ticker

Interim results period

Full-year results period

Commonwealth Bank of Australia

CBA

February

August

National Australia Bank

NAB

May

November

Westpac Banking Corporation

WBC

May

September

Australia & New Zealand Banking Group

ANZ

May

October

With Financial Services companies making up over 20% of the ASX 200 benchmark – in terms of market capitalisation – traders and investors typically watch the earnings reports of these stocks closely, given their potentially outsized impact on the broader market.

For investors watching on, it should be noted that Australia’s big four banks do not all report on the same earnings calendar. For example, while the largest of the big four banks – the Commonwealth Bank of Australia – generally reports its annual results in August, other banks, such as ANZ do not report full-year results until October.

Investors and traders should be aware of the above, as there often exist ‘information gaps’ between reporting periods, particularly given that banks such as NAB or WBC do not report earnings performance as part of their quarterly trading updates. The table to the left breaks down those differences:

Bank earnings – 3 key things investors need to watch out for

While general market sentiment and macroeconomic factors will always impact corporate earnings to a degree, when it comes to bank stocks there are generally three key performance areas that impact market sentiment more so than others.

1 - Earnings and margins

Besides cash flow, a company’s earnings are generally considered its most important metric. In Australia – bank earnings are typically broken down by statutory earnings, and cash or underlying earnings. Many consider underlying earnings to be the more important metric of the two, as it does not incorporate one-off items and therefore gives investors better insight into the actual or ‘underlying’ performance of the business.

Specific to banks, many also watch big four net interest margins or NIMs closely – as it measures the overall net interest income a company is generating from its credit products. With Australian banks carrying exposure to billions worth of residential mortgages and business loans, watching this metric closely remains a must. Ultimately, many Australian banks have seen their NIMs squeezed in recent years, as interest rates hover around historically low levels.

2 - Capital strength

After the global financial crisis in 2008, banks were required to hold greater levels of capital as a means of boosting their resiliency in times of crisis. As APRA explains:

‘Capital is a measure of the financial cushion available to an institution to absorb any unexpected losses it experiences in running its business. For a bank, such losses might include loans that default and are written off. Insurers might be hit by an unexpectedly high volume of claims in the wake of a major natural disaster.’

In a regulatory sense, for the big four banks to be considered ‘unquestionably strong’, APRA mandates that they have a capital position – measured in terms of the Common Equity Tier 1 ratio – at over 10.5%.

3 - Dividends

If earnings highlight the strength of a business, then dividends are the reward for that strength. Owing to their high payout ratios, Australian banks have attracted a loyal cohort of income-focused over the years.

While dividends are generally paid out as a percentage of earnings or cash flows, they can also be impacted by external factors, such as changes in the regulatory environment. In 2020, for example, APRA put a limit on how much Australian banks could pay out in the form of dividends; as a means of ensuring that the big four banks could adequately support individuals and businesses during the pandemic. Though that caused short-term alarm amongst many investors, and bank stocks were sold off heavily in response, banks such as CBA have returned to paying pre-covid dividends to investors.

CBA share price: performance overview

As part of CBA’s most recent full-year results, the bank reported:
  • Cash net profits after tax of $8,653 million, up 19.8% YoY
  • Net interest margins (NIM) of 2.03%, down 4 bps YoY
  • A common equity tier 1 capital (CET1) ratio of 13.1%
  • A final dividend of $3.50 per share, up 17% YoY

Source: IG Charts

NAB share price: performance overview

As part of NAB’s most recent quarterly results, the bank reported:
  • Unaudited cash earnings of $1.70 billion, up 10.3% YoY
  • Net interest margins were 'broadly stable'
  • A common equity tier 1 capital (CET1) ratio of 12.6%
  • No commentary on dividends were provided

Source: IG Charts

WBC share price: performance overview

As part of WBC’s most recent interim results, the bank reported:

  • Cash earnings of $3,537 million, up 256%
  • Net interest margins were 2.09%, down 4 bps
  • A common equity tier 1 capital (CET1) ratio of 12.0% (as per the Q3 capital update)
  • An interim dividend of 58 CPS was announced

Trade WBC now.

Source: IG Charts

ANZ share price: performance overview

As part of ANZ’s most recent interim results, the bank reported:

  • Cash profits from continuing operations of $3,941 million, down 10% YoY
  • Net interest margins were 1.63%
  • A common equity tier 1 capital (CET1) ratio of 12.2% (as per the Q3 capital update)
  • An interim dividend of 70 cps

Trade ANZ now.

Source: IG Charts

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