Australian Bank Earnings

After seeing their share prices rebound strongly over the last six months, Australia’s big four banks – CBA, WBC, ANZ and NAB – will likely be closely scrutinised by investors this month as they release their latest set of interim and quarterly results.

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Australian bank latest earnings - everything you need to know

Company Earnings Report Date Results Type
Commonwealth Bank of Australia 10 February 2021 Interim
National Australia Bank 16 February 2021 Quarterly
Westpac Banking Corporation 17 February 2021 Quarterly
Australia & New Zealand Banking Group 18 February 2021 Quarterly

With Financial Services companies making up 26.6% of the ASX 200 benchmark, traders and investors will likely be keenly focused on the upcoming results from Australia's big four banks.

While the Commonwealth Bank of Australia is poised to release its first-half FY21 results on 10 February, the remaining big four banks are not due to report their quarterly results until the back-half of February.

Heading into this earnings season, CBA remains the largest company and bank listed on the ASX, boasting a market capitalisation of $155 billion. By comparison ANZ is the smallest of the big four, with a market value of $70 billion.

Major Banks Outlook

Despite sentiment around the big four banks improving in the last six months, with interest rates at historically low levels, bank margins under pressure, and the coronavirus remaining a key overhang, the sector remains under pressure. On the flip side, the prospect of a robust economic recovery, a rebound in bank earnings, and an improved property market outlook may prove to be key tailwinds for the banks, noted Morgan Stanley in a recent report.

With the above in mind, analysts from Morgan Stanley have argued that near-term performance will likely be anchored to three key factors, including: the 'magnitude and recovery in earnings', bank dividends and return on equity performance. As a result, the investment bank said: 'We expect the major banks to outperform the ASX200 in 2021 given domestic economic trends, a cyclical earnings recovery, healthy balance sheets, a lower overall risk profile, and sector rotation.’

Bank Dividends: Smooth Sailing or Not?

Bank dividends proved to be a key causality of the coronavirus pandemic in 2020. In April of last year, APRA – Australia’s key banking regulator – dealt a blow to the banks, providing regulatory guidance that stipulated bank dividend payout ratios should not exceed 50% of earnings.

Margin pressure, concerns over falling property prices, a weak economy, and the possibility of sustained lower dividends as a result of APRA's guidance likely contributed significantly to the sell-off in bank stocks in mid-2020. Yet as the outlook for Australia’s economy has improved, APRA eventually reversed that decision, in December 2020 saying it would no longer require banks to meet a ‘minimum level of earnings retention’.

Importantly, CBA will be the only bank to provide the market with an interim dividend announcement update in February, meaning investors will have to wait sometime before they gain a broader picture of how the sector will handle dividend payouts moving forward. Despite that, the market will likely be keen to see all of the big four banks provide commentary around future dividends, given the significant attention bank investors often pay to yields.

CBA share price: technical analysis

CBA’s shares have seen the biggest gains since the lows of the pandemic-recession, owing to the bank’s high exposure to the housing market and private lending. The trend looks promising for CBA’s shares, with momentum skewed to the upside, and technical resistance at the pre-pandemic highs of $91.00 coming into view after a recent break $87.50. The RSI is technically in overbought territory, but is yet to diverge from price or fall below the 70 mark on the weekly charts, denoting a potential bearish reversal. Support exists now at the $87.50 level, and below that, roughly $84.00.

Source: IG Charts

NAB share price: technical analysis

NAB shares have been relatively slower to recover compared to other members of the Big 4, mostly owing to the bank’s heavy exposure to business lending. Never the less, the share price’s trend is undoubtedly bullish, with momentum strong and trending upwards. After breaking resistance at around $25.00 recently, the pre-pandemic highs for the stock come into view now at around $27.30.

Source: IG Charts

WBC share price: technical analysis

Westpac’s shares are clearly in a medium-term uptrend, however its recovery from the pandemic lows has been less emphatic. Nevertheless, the trend and momentum is looking bullish, with a reading below 70 on the weekly RSI indicative of a market that’s not yet flashing any overbought signal. Having recently broken through resistance and retested as support the $20.60 level, the price has refilled a gap from early in the pandemic, and looks now towards the next resistance level at roughly $US23.20.

Source: IG Charts

ANZ share price: technical analysis

The ANZ share price has rallied strongly since the final months of 2020, with its price action establishing a clearly bullish trend. Having broken resistance around $24.50, the share price now eyes the $26.00 mark, before the pre-pandemic highs of roughly $27.30 come into view. Working against the rally are signs the trend’s momentum is slowing, with the weekly RSI falling from above 70 and the MACD signal lines converging. However, there are few clear signs of reversal in price action yet.

Source: IG Charts

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