For a company that just posted a record half-year profit, the market didn’t look kindly on CBA, or the banking sector as a whole.
Despite reporting a $5.2 billion net profit on the back of surging net interest margins — a key measure of bank profitability — investors fled CBA and its rivals.
Commonwealth Bank shares ended the day 5.7 per cent lower at $103, with Westpac off 4.3 per cent, NAB off 4.1 per cent and ANZ down 3.8 per cent.
It seems fears that CBA’s net interest margin may have peaked, albeit at a reasonably healthy 2.1 per cent in the December half, were behind the sell-off.
That was combined with fears about the provisions the banks might have to book as higher interest rates see a growing number of home and business loans turn bad.
Falling loan loss provisions have boosted bank profits, so increasing ones will hurt them.
The strange thing is that none of this is particularly new or surprising, so today’s sudden realisation that Australia’s banks might be facing a tougher couple of years seems rather weird.
Overall, the financial sub-index plunged 3.3 per cent.
It’s such a big part of the market that the ASX 200 fell 1.1 per cent, even though the number of companies that fell (96) was only just greater than those which rose (92). The broader All Ordinaries was off 0.9 per cent.
A 0.5 per cent gain for BHP and 1.5 per cent rise for Rio Tinto helped cushion the falls on the two main indices, although Fortescue fell 0.8 per cent with investors unimpressed by its results.
Wesfarmers had a modestly positive reception for its profit result, rising 1.3 per cent to $49.35.
After being walloped for two days in a row on shock news at the start of this week of falling revenue and a potential $1.6 billion write-down, Star Entertainment bounced back strongly today, although it’s still down more than 20 per cent compared to where it was at the end of last week.
Five biggest falls:
- BrainChip Holdings: -13.6% to $0.51
- Corporate Travel Management: -8.7% to $15.75
- Treasury Wine Estates: -6.9% to $13.34
- Sayona Mining:-6.5% to $0.215
- Commonwealth Bank: -5.7% to $103.00
Five biggest gains:
- Star Entertainment: +14.4% to $1.47
- GUD Holdings: +8.1% to $8.94
- Cochlear: +7.8% to $225.28
- Magellan Financial Group: +7.1% to $9.45
- New Hope Corporation: +5.9% to $5.73
Thanks for coming along for a pretty wild ride today with me, Rhiana, Gareth and Sue. What a busy day on the markets and for our central bankers.
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