CBA

Here is an Australian banking sector update from stockmarket analyst, Macquarie Research Equities. They rank their stock preferences in order from Wetpac (WBC), National Australia Bank (NAB), ANZ (ANZ), St George Bank (SGB) and Commonwealth Bank (CBA).

Banking Sector: Sector Strategy

Banking sector update provided by Australian sharemarket analyst Macquarie Research. The analysts still prefer the banking sector and their company preference in order are: WBC, CBA, ANZ, SGB and NAB.

Banking Sector: Where is the Banking Sector Heading?

Here is an update about the Commonwealth Bank (CBA) result released this morning by Australian stock analyst Macquarie Research Equities. They have an Outperform Recommendation with a 12-month price target of $60.00 on the stock.

Here is an Australian Banking Sector Update from stock analyst Macquarie Research Equities:

Australian stock market analyst UBS has provided an Austrlian banking sector update. They have earmarked Westpac (WBC) as the key Buy recommendation in the banking sector. Westpac (WBC) is their key buy post the appointment of Gail Kelly as CEO of Westpac (starts Feb-2008).

Australian banking shares have underperformed the market for a second week running from last week. Despite rising 0.4%, they still underperformed the market by 70bp. The two value plays, WBC and ANZ, rebounded strongly finishing the week up 2.9% and 1.4% respectively. However, partly offsetting this was NAB's underperformance. The bank’s recent UK analyst tour failed to turn sentiment around on the stock, which fell by 2.2% last week. Australian sharemarket analysts Macquarie Research Equities have the following major bank preferences: 1) CBA, 2) WBC, 3) ANZ, 4) NAB, 5) SGB. CBA remains their top pick in the sector with final results and final dividend being announced on 15th August 2007. CBA and WBC continued to dominate local debt market league tables: WBC and CBA continued to dominate the debt market issuance rankings in the June quarter, consistent with recent volume trends reported in their institutional division results. WBC maintained its number 1 position in the Australian syndicated loan market, with 15 issuances and 17.2% market share for the six months ending June. CBA improved its Australian debt market ranking significantly over the last six months, from fourth position a year ago to being number 1, though this partly reflects the large mortgage securitisation issue conducted during the period. This is consistent, though, with the message management put out recently that momentum continues to build within the bank’s institutional division. As a result, rejuvenation of CBA’s institutional banking is also likely to remain a key driver of CBA’s earnings growth in the short term. Personal bankruptcies deteriorate further: Personal bankruptcies in Australia deteriorated slightly further in the June quarter, with year to June bankruptcies increasing by 13% on pcp. Not surprisingly, NSW continued to be the key driver, rising 24% on a year-on-year basis. This is likely to continue to impact arrears levels for the banks in the near term, so far this has not translated into a significant increase in write-offs. The analysts believe that rising bankruptcy rates raise the risk that loss rates will increase more significantly, especially on unsecured personal lending, where these types of lending tend to account for a greater percentage of write-offs. NAB UK downgrades. Post NAB’s UK trip, the analysts have revised their UK forecasts leading to downgrades at the group level of 0.3% in FY07, and 1% in FY08. Their new price target for the Australian bank is $42.80.

Commonwealth Bank of Australia has a maintained Buy, Low risk Recommendation from Australian sharemarket analyst Citi Investment Research. Today's update emphasised the steps taken to turn around declining franchises, particularly in SME and corporate banking. The goal appears to be recovering lost revenue. Today management paid little regard to the cost and risk implications of achieving this. They noted a more progressive approach to the bank’' global markets business, taking a stronger position in equity markets. In addition, the SME franchise has taken the innovative step of hiring bankers from small business. As management senses an opportunity to expand the (generally conservative) upper boundaries of Australian major bank risk tolerance, the analysts note increased exposure to lower rated institutional credits and rising non-traded market risk VaR levels. At a Group level the Commonwealth Bank of Australia, a counter-sector increase in the gap between current and mid-cycle average loss rates has occurred. Still suffering from sins of the past. management signaled a 3 – 5 year turnaround time in the Business Bank (incl. Agri), within which they are in year One. While the actions taken represent clear positive steps, investors will be seeking tangible results before too long.

CommBank aka Commonwealth Bank shares have an upgraded broker call of Outperform from stockmarket analyst Macquarie Research Equities. Last Friday, the analysts upgraded their recommendation to Outperform on CBA, and moved it to their key pick in the bank sector. The following article reviews the outlook for CBA in more detail, and highlights that market consensus forecasts for FY08 are possibly too bearish. MRE expect FY08 guidance commentary at CommBank's August result to drive further upgrades, and believe CBA is one of the only banks currently providing value and price catalysts, beyond those two banks yet to go ex-dividend, NAB (1 June) and SGB (13 June). CommBank should extend current guidance to FY08, driving upgrades: At its August result, the analysts expected the Commonwelth Bank to continue to guide for 'EPS growth which meets or exceeds peers' – consistent with its FY07 guidance and Ralph Norris’ original guidance for the three years to FY09. Currently, this would imply FY08 EPS growth of ~9–10%, approximately 2% above current FY08 consensus for CBA. Accordingly, while doubters will remain, the analysts expect management's confidence at the FY07 result to provide a strong chance of upgrades. Institutional, financial markets and wealth management remain the key drivers for now: Rejuvenation of CommBank's institutional banking and global financial markets operations, combined with continued good growth in wealth management are likely to remain CommBank's key drivers in the short term, with revenue growth from retail banking expected to improve as FY08 progresses. While the analyst recognises that this reliance on institutional and financial markets increases the uncertainty in Commbank's growth in the short term, the analysts are more comfortable that current relative pricing more than factors this in. Some green shoots in retail, key is holding onto recent gains: The March quarter improvement in CBA’s retail market share trends provide some encouraging signs, however analysts believe this business is still in the early stages of a turnaround with part of the recent improvement related to a specific one-off campaign. The key short term is to ensure the improving trend in CBA's customer satisfaction is maintained and gradually converted into an improved revenue trend as FY08 progresses. While the recent departure of Michael Cameron poses a short term risk to maintenance of this momentum, Ross McEwan has the background to drive this on at least an interim basis. They have upgraded their earnings in FY08 up 2%, and FY09 up 2.5%, largely reflecting upgrades to business lending growth, financial markets and other income. In the analyst's view, CommBank is currently the only major bank providing value and price catalysts: CBA's banking operations are trading at a ~5% discount to peers (excluding wealth from all), consensus FY08 forecasts are ~2% too low. It also has medium-term turnaround potential and no pending CEO succession issues. These drivers explain last Friday's upgrade in CommBank's rating to Outperform and its move to their key sector pick.

Sharemarket analyst Macquarie Research Equities have provided a 2007/2008 Australian Budget Impact statement. Investors who had been eagerly awaiting the release of the 2007-2008 Budget were last night greeted with a host of initiatives that included a significant boost to household disposable income.