ASX large-cap banking stocks to keep tabs on this season
Australia’s banking sector has proven its resilience in 2021 by standing the test of time and sustaining growth despite the adversities brought on by the pandemic. Australia’s banking sector, one of the best-weighted sectors in the ASX200, recorded its best year since 2013, gaining 20.2% in 2021. Stock prices of Australia’s four largest banks recorded growth double-digit annual rate, ranging from 10% to 28%. % in 2021.
The industry was quick to digitize most of its consumer offerings after the COVID pandemic hit the country in March 2020. The banking industry has also introduced several user-friendly online services such as buy now, pay later ( BNPL) that allow consumers to convert their large purchases into interest-free installments.
Experts say the digitization movement being carried out by banks and the ongoing economic recovery will support profit growth for Australia’s major banks in 2022. Against this background, let’s take a look at some bank stocks.
Australian and New Zealand banking group (ASX: ANZ)
ANZ, one of Australia’s top five lenders by market capitalization, had a strong performance in fiscal 2021, with annual statutory profit up 72% to A $ 6.16 billion. That profit was slightly higher than its pre-pandemic A $ 5.95 billion profit reported in the year ending September 30, 2019.
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Its prudential risk management resulted in loss rates well below expectations. The lender’s capital buffer is also at a historically high level with a CET1 of 12.3%. Given its strong capital position, it remains to be seen whether the Australian and New Zealand banking group could benefit from the ongoing economic recovery and expected credit growth in the economy once the pandemic is over.
When it comes to stock performance, the Australian and New Zealand banking group has achieved a return of 22.16% in the past year. The lender also pays a healthy dividend to its investors. The average dividend yield for the last five years for this share is 7.8%.
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National Australia Bank Ltd (ASX: NAB)
NAB experienced a stronger-than-expected recovery in business in FY2021, with full-year cash profit reaching AUS $ 6.56 billion, compared to A $ 3.71 billion a year ago. a year. This was higher than the average estimate of 13 analysts surveyed by Bloomberg.
The Melbourne-based lender, Australia’s largest, also rewarded shareholders with buybacks. The street expects the National Australia Bank to announce further buybacks given it has excess capital of A $ 5.2 billion.
Its common Tier 1 capital ratio fell from 11.5% to 13%, suggesting that it is well capitalized to take advantage of the expected lending growth in the economy once the pandemic is over. In August 2021, it entered into an agreement with the Citi group to acquire its consumer banking business in Australia.
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NAB shares have jumped 35.6% in the past year, while its five-year average dividend yield stands at 8.6%.
Westpac Banking Company (ASX: WBC)
The shares of this lender saw a significant correction in November 2021 after posting earnings for fiscal 2021. Although its net income rose 130% to AU $ 4.1 billion for the fiscal year ended 30 September 2021, its main profits were down. The increase in profits is explained by the reversal of provisions made for loan losses.
Its basic income (net income before depreciation charges and taxes) fell 12% due to lower income and higher expenses. After dealing with regulatory issues, Westpac is in the midst of a transition and is reinvesting in the business, which will lead to increased costs in 2021. However, the lender expects its spending to decline in 2024.
Its net interest margin, the difference between the interest rate it receives on its advances and the interest rate it pays on its deposits, decreases each year.
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Even after the correction seen in November, Westpac shares have returned 16.5% over the past year. Given the decline in its share price in November 2021, the streets seem to have cooked in the negative news. The improvement in its operational performance during the current year would be closely monitored by market players.