Global markets rebounded overnight as it appears investors who were taking profits around the geopolitical situation with North Korea have done so, for now. The US dollar also bounced, helped by a comment from New York Federal Reserve president William Dudley to the Associated Press that he supported another US rate increase this year if the economy improves further.
Corporate profits across Australia and NZ will remain a focus locally, with major company’s such as ANZ Bank set to announce results today. In terms of the US market and US earnings, the market has been relatively flat given solid earnings, although it should be kept in mind that the market is at all-time highs and expectations are high.
Stock in Focus: Heartland Bank (HBL.NZ)
HBL shares reached new heights yesterday following a solid annual profit result, as the Bank has outperformed its Australian counterparts in recent times.
NZ’s only locally-owned and listed bank managed to maintain relatively wide margins while expanding its loan book across all three of its main target sectors which saw profits up +12% on last year. Net profit rose to $60.8 million from $54.2 million a year earlier, which was more or less in line with analyst expectations.
"The increase in profitability was driven primarily by growth in receivables across all divisions – households, business and rural," the bank said in a statement. "Looking forward, underlying asset growth is expected to continue, with strong household, business and rural volumes projected through execution of Heartland's strategy, in particular the expansion of customer reach through digital and intermediary channels."
Heartland largely ignores the residential mortgage market dominated by the country's big four Australian-owned banks in favour of targeting higher margin consumer lending, such as auto-loans and reverse mortgages, and investing in online lending channels.
does not currently have full research coverage on HBL.
While we have been cautious around the banking sector for some time, we prefer ANZ Bank, Macquarie, and Bank of Queensland.
Australia & New Zealand Market Movers
The Australian share market rallied on Monday (ASX 200 index +0.66%) with major banks driving the gains. News that Commonwealth Bank boss Ian Narev will retire in 2018 in the wake of an anti money laundering scandal received a positive reaction from investors. Also in the banking sector, Bendigo & Adelaide Bank surged 7.5% as the regional lender reported a reasonable result, which also saw Bank of Queensland shares rally. On the flipside, JB Hi-FI, Ansell and Gold Miner Newcrest Mining all fell as their profit announcements disappointed the market.
The New Zealand market was higher on Monday (NZX 50 index +0.55%) as Contact Energy and Heartland Bank rose on positive earnings, while Freightways dropped on concern over margin pressure (despite a 22 percent lift in annual profit on the strength of volume growth). Opus International Consultants soared on the prospect of a takeover.
3 Things Markets Will be Watching this Week
1. Corporate profits will be in focus as earnings season continues across Australia, NZ and the US.
2. The geopolitical situation as tensions remain high between the US and North Korea.
3. The Reserve Bank of Australia release minutes from its last meeting n Monday.
Have a Great Day,
Team