Bang for the buck: ASX banks 3-day win, closing 0.3% higher

Australian stocks posted its third straight day of gains underpinned by a tech and miners surge with an impressive rally by National Australia Bank (ASX:NAB), helping offset weakness across the sectors.

Wall St handed down a positive lead after the tech-heavy Nasdaq outperformed amid an ease in treasury yields. The ripple effect saw the local bourse jump at the open then fade towards lunchtime, followed by some meandering near the flat line to manage to edge higher at the close.

NAB’s net interest margin falls 5bps

National Australia Bank (ASX:NAB) surged 4.5 per cent at $29.67 after the nation's second-largest lender posted first-quarter financial year 2022 cash earnings ahead of expectations. The bank reported a 12 per cent jump in quarterly cash earnings of $1.8 billion versus Morgan Stanley’s expectation of $1.6 billion, driven by home and business lending growth.

Over the three months to 31 December 2021, the bank’s home lending grew by 2.6 per cent, small business lending grew by 3.4 per cent and deposits grew by $18 billion. The bank’s results were also buoyed by a credit impairment write-back of $35 million and a decrease in the number of borrowers making 90+ day overdue payments, reflecting continued improvement in the economic landscape.

NAB mimicked its peers in flagging the fiercely competitive home loan environment which attributed to its net interest margin falling 5 basis points to 1.64 per cent in the quarter, while the closely watched measure of spare cash, the common equity tier 1 ratio was 12.4 per cent for the December quarter, compared with 13 per cent the quarter prior.

Commonwealth Bank in favour by brokers

Meanwhile, Commonwealth Bank (ASX:CBA) jumped 1.2 per cent at $100.78 after several brokers, at least seven (that I read) raised their target prices and/or ratings following its first-half financial year 2022 result on Wednesday. UBS said that the nation’s largest bank’s first half earnings per share were 11 per cent above the consensus estimate and pre-provisioning operating profit was a 3 per cent beat.

The broker highlighted strong growth, up 8 per cent half-on-half in average interest earning assets, from growth in business banking and home lending. As a result, UBS raised its earnings per share forecasts, driven by stronger lending growth, lower credit impairment charges and increased buy-backs, partially offset by non-interest income cuts, keeping its rating as a neutral with a popped target price to $100 from $95.

In other banks, Westpac Banking Corporation (ASX:WBC) rose 1.1 per cent higher at $22.62, ANZ Banking Group (ASX:ANZ) added 1.1 per cent higher at $27.71 while Macquarie Group (ASX:MQG) bucked the trend, wiping off its gains from the past two days to close 2.2 per cent lower at $193.39.

AMP unveils $252m loss in FY21

In other results, AMP (ASX:AMP) confirmed that they received “inbound enquiries” for its AMP Capital business after handing down a full-year net loss of $252 million for 2021, driven by impairment charges, transformation costs and remediation expenses. The wealth giant said that it was not “unusual at this point in a demerger preparation process" to attract interest. Shares closed 6 per cent higher at $1.07.

Miners closed mixed with shares in Fortescue Metals Group (ASX:FMG) galloping 4 per cent higher at $22.28, Rio Tinto (ASX:RIO) added 2.1 per cent at $118.96 while shares in BHP Group (ASX:BHP) didn’t manage to tip its nose over the green, closing 0.08 per cent lower at $48.28.

Mirvac & AGL Energy tumbles

Meanwhile, Mirvac (ASX:MGR) tumbled 2.3 per cent to $2.55 after the property group maintained its financial year 2022 earnings guidance versus delivering the upgrade which the market expected. Lockdowns in the six months ended December 2021 hurt its retail property businesses though it was offset by strong performance by its property development operations.

AGL Energy (ASX:AGL) sank 3.5 per cent at $7.27 after the energy giant’s modest financial year 2022 guidance upgrade failed to impress the market. Management flagged that earnings are set to come in lower in the second half due to a spike in costs of capacity to cover periods of peak electricity demand.

Bapcor wins, Cimic loses

The best performing stock was Bapcor (ASX:BAP) amid several broker upgrades. Ord Minnett upgraded its rating for the company to a buy from a hold with a boosted price target to $8.60 from $7.20. The owner of Autobarn’s December-half result broadly met Ord Minnett's forecasts after suffering store closures, higher costs, supply-chain disruptions and investment in a new head office and Victorian distribution centre. The dividend outpaced the broker's estimate at 10 cents. The broker expects first-half headwinds to abate in the June half and eyes potential for growth in Trade Auto Parts and Bapcor's Australia and New Zealand store network. Ords also forecasts a rise in operating margins and leverage through higher own-brand sales and long-term growth prospects in Asia.

In the loser’s circle, the nation’s biggest construction group, CIMIC (ASX:CIM) reported a 35 per cent drop in annual net profit to $402 million in 2021. However, the company flagged shareholders that higher profits between $425 million and $460 million is on the cards this year. Shares sank 7.1 per cent to $15.89.

The Australian dollar firmed up holding its 3-day rally amid the Reserve Bank ending its bond buying program today.

Countdown to the US inflation print

Investors now look to Wall St as market participants await the January inflation data ahead of the Federal Reserve’s next meeting in March. Between now and then, not only will the data-dependent central bank mull on the inflation print, there will also be a fresh set of labour market figures. Analysts expect inflation to rise to 7.3 per cent from 7 per cent in December.

Given the recent rally, traders are still nervous about the outlook for monetary policy and how aggressive the rate hike cycle will look. Market participants forecast 5 interest rate hikes, rising at the start of the cycle, then see how inflation reacts amid the easing of supply chain disruptions. It will be interesting to see how much wages drop on a real basis after the consumer price index figures come out, and what this means for consumer sentiment. All this during earnings season with the weekly jobless claims also due. The countdown to 12.30am AEST begins.

At the closing bell, the S&P/ASX 200 was 0.3 per cent or 20 points higher at 7,289.

Futures

The Dow Jones futures are pointing to a rise of 7 points.
The S&P 500 futures are pointing to a fall of 8 points.
The Nasdaq futures are pointing to a fall of 42 points.
The SPI futures are pointing to a rise of 41 points when the market next opens.

Best and worst performers

The best-performing sector was information technology, up 2.6 per cent, followed by financials up 0.9 per cent, then materials adding 0.5 per cent. The worst-performing sectors were healthcare, industrials, utilities, and consumer staples which all closed lower by 0.8 per cent each. This was followed by communication services, down 0.5 per cent and energy.

The best-performing stock in the S&P/ASX 200 was Bapcor (ASX:BAP), closing 10 per cent higher at $7.15. It was followed by shares in Block (ASX:SQ2) and Megaport (ASX:MP1).

The worst-performing stock in the S&P/ASX 200 was Cimic Group (ASX:CIM), closing 7.1 per cent lower at $15.89. It was followed by shares in ASX (ASX:ASX) and AGL Energy (ASX:AGL).

Asian markets

Japan's Nikkei has gained 0.4 per cent.
Hong Kong's Hang Seng has lost 0.2 per cent.
China's Shanghai Composite has lost 0.01 per cent.

Commodities and the dollar

Gold is trading at US$1833.96 an ounce.
Iron ore is 2.1 per cent lower at US$146.75 a ton.
Iron ore futures are pointing to a rise of 1.4 per cent.
Light crude is trading $0.04 higher at US$89.70 a barrel.
One Australian dollar is buying 71.73 US cents.