The latest Market Talks covering Equities. Published exclusively on Dow Jones Newswires throughout the day.
2025 ET - New Australian banks which have emerged under the country's new licensing regime are likely to face increasing challenges in competing with incumbent banks, say Moody's Investors Service in a new report. Raising capital may become more difficult for new banks as investors grow more cautious amid weakening economic conditions. Many new banks have struggled to generate sufficient profit, and have needed to rely on external capital to fund their operations. Still, Moody's sees areas that new banks can target to grow profitably, such as small-to-medium enterprise lending and personal loans. It calls out Judo, which differentiated itself by focusing on lending to SMEs that urgently needed funding during the pandemic, as an example. (alice.uribe@wsj.com)
2014 ET - Japanese stocks are lower in early trade, dragged by falls in auto and shipping stocks, as the yen strengthens and the economic outlook dims amid concerns about the turmoil in the global banking industry. Nissan Motor falls 1.8% and Nippon Yusen is 2.4% lower. Inpex Corp. is down 1.4% following drops in crude oil prices on Friday. USD/JPY is at 132.35, down from 133.04 as of Friday's Tokyo stock market close. Investors remain focused on any signs of weakness in the banking sector and the Fed's policy decision later this week. The Nikkei Stock Average is down 0.2% at 27286.55. (kosaku.narioka@wsj.com; @kosakunarioka)
2003 ET - Life360's cost cuts drive significant upgrades to Morgan Stanley's EPS forecasts for the family-safety app provider. MS analysts say in a note that FY 2023 revenue guidance was broadly in line with their forecasts, so they see operating leverage being boosted by lower costs. They raise their normalized FY 2023 EPS forecast for the company by 105%, for FY 2024 by 224%, and for FY 2025 by 89%. Leverage from upcoming Android price changes and bundles more than offsets concerns about customer churn from price rises, they add. MS reiterates its overweight rating and A$8.50 target price on the stock, which is down 1.4% at A$4.88. (stuart.condie@wsj.com; @StuartLCondie)
1952 ET - Australian banks could increase focus on shoring up stable deposits, funding, and liquidity, which may put pressure on margins, say Macquarie analysts in a note. The investment bank sees that ANZ, NAB and Westpac will need to raise more term funding than their maturing the Australian central bank's term funding facility to achieve a conservative funding mix. "We continue to see risk to bank margins and earnings in FY 2024 as consensus expectations do not appear to be fully reflecting higher funding costs and deposit competition," Macquarie says. It has FY 2024 margins as 7-8 basis points below consensus, while its earnings forecast is 2%-9% below consensus. "We see Australian banks as defensive but expensive in global context and remain underweight the sector," it adds.(alice.uribe@wsj.com)
1949 ET - The repayment of the Australian central bank's term funding facility looms as a major point of uncertainty over the next 12 months for the country's lenders as funding markets wobble, says Citi analysts in a note. "Tightening liquidity is likely to expose a few and, while they won't look like Silicon Valley Bank in Australia, it is the withdrawal of funding that is the common factor," Citi says. From this, it then wonders if the events in the U.S. may see the TFF get extended. Even so, Citi sees that Australia's major banks may be winners, as they increasingly turn to deposit markets to bridge the funding gap. Citi sees CBA as best placed as it has the largest deposit franchise in Australia, and would benefit from a flight-to-quality perspective that's likely to play out in the U.S.(alice.uribe@wsj.com)
1949 ET - Japanese stocks may decline amid continued concerns about the turmoil in the banking industry and its impact on the economy. Nikkei futures open down 155 points at 26875 on the SGX. UBS Group agreed to take over troubled Credit Suisse, while the Fed and five other central banks announced an expansion in the frequency of dollar swap line operations. Investors remain focused on any signs of weakness in the banking sector and the Fed's policy decision later this week. USD/JPY is at 132.25, compared with 133.04 as of Friday's Tokyo stock market close. The Nikkei Stock Average rose 1.2% to 27333.79 on Friday.(kosaku.narioka@wsj.com)
1940 ET - Australian Clinical Labs could encounter regulatory challenges in its pursuit of Healius, RBC Capital Markets says. Australian Clinical Labs has offered 0.74 of its own shares for each Healius share, representing a nil-premium merger based on stock performance through last week. In a note, analyst Craig Wong-Pan says the bid looks opportunistic, but agrees there are significant cost savings available from a deal. Australian Clinical Labs has estimated around A$95 million in cost savings. "We are wary of the ACCC approving this transaction in the current form," RBC says. "We expect asset divestments may be required to obtain ACCC approval, which could reduce the amount of synergies from the merger."(david.winning@wsj.com; @dwinningWSJ)
1933 ET - Link's agreement to sell its Banking and Credit Management business came earlier than Citi analyst Nigel Pittaway was expecting, and while the price is lower than some previous bids, he still views it as encouraging. In a note, Pittaway says that Citi believes the transaction removes a currently loss-making business for Link. "Market conditions and multiples have changed since 2021 and we were forecasting continued losses from this business," says Citi, which adds that it expects investors will warm to this step on the road to simplification. "At some stage, perhaps relatively soon, Link should shrink to its core businesses of Retirement and Superannuation Solutions and Corporate Markets. Recent 1H FY 2023 performance of these divisions was strong," says Citi. (alice.uribe@wsj.com)
1932 ET - Sezzle's February trading update was stronger than expected by Ord Minnett analyst Phillip Chippindale, who sees the buy-now-pay-later provider as an increasingly steady performer. Chippindale highlights a robust 9.0% revenue yield and improving earnings, telling clients in a note that Sezzle is performing well in terms of managing bad debts. Ord Minnett has a last-published buy rating on the stock and Chippindale expects the market to make minor positive adjustments to forecasts following the update. His A$1.20 target price on the stock is under review. Shares are up 2.9% at A$0.54. (stuart.condie@wsj.com; @StuartLCondie)
1919 ET - Australian Clinical Labs's all-share takeover bid for Healius is unusual because it represents a nil-premium merger when the company is touting around A$95 million in cost savings from combining operations, Jefferies analyst David Stanton says in a note. Australian Clinical Labs is offering 0.74 of its own shares for each Healius share, seeking to create Australia's largest pathology services provider. Stanton notes that Healius needs more pathology volumes to grow that part of its business, while he is wary of the company's plan to grow its Pathology Collection Centres as it could drive up costs. (david.winning@wsj.com; @dwinningWSJ)
1909 ET - AGL Energy's earnings can regain their spark as electricity prices rise, bull Macquarie says in a note. "Government intervention limits some of the upside in both gas and electricity, but realized prices should still strengthen the earnings by A$500 million (+38%), lifting net cash flow to A$1 billion per annum for at least the next 2 years," Macquarie says. It restarts AGL at outperform with a A$8.31/share price target, pointing to the company's investor day in June as a catalyst for the stock if management can deepen confidence that a shift toward renewables can be funded. (david.winning@wsj.com; @dwinningWSJ)
1839 ET - New Zealand's NZX-50 falls 0.7% on Monday morning as traders place bets on whether the weekend rescue of Credit Suisse can restore trust in the global banking system. Local securities in Australian banks ANZ and Westpac are down by 0.7% and 1.2%, respectively. Smaller lender Heartland is up by 0.6%, one of just a handful of index components to show gains. Shares of most larger companies are lower, with 11 of the 12 biggest stocks in the red. Meridian Energy and Contact Energy are down by 0.8% and 1.3%, respectively, while a2 Milk is 2.5% lower and Auckland International Airport drops 0.8%. The NZX-50 is on a three-day winning streak, but has still lost ground for six consecutive weeks. (stuart.condie@wsj.com; @StuartLCondie)
(END) Dow Jones Newswires
March 19, 2023 20:25 ET (00:25 GMT)
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