0322 GMT - ANZ's 2H FY 2023 results were weaker than the market expected and company commentary didn't ease concerns about the lender's margin outlook or give more information about its Australian mortgage strategy, says Morgan Stanley analysts in a note. Still, the investment bank says it is staying overweight on the stock, seeing continued diversification benefits from ANZ's business mix mitigating headwinds in Australian retail banking. On costs, while ANZ didn't provide guidance, MS reckons the lender should be able to achieve slightly lower on-year growth of around 4%, with similar cost savings and investment spending. MS cuts the stock's target price 2.6% to A$26.30. ANZ falls 3.3% to A$26.90. (alice.uribe@wsj.com)

0310 GMT - QBE's 3Q FY 2023 pricing is likely to slip below the around 10% level of 1H FY 2023, say Morgan Stanley analysts in a note. While this may concern investors, MS says, it sees margin expansion in the insurance company's global operations. Suncorp and IAG look to MS to present easier ways to play the pricing cycle. "Domestics stand out with near-term pricing power, pure play appeal and an option to over-earn from El Nino," says MS. But for QBE, which may see a slowing in commercial pricing, falling claims inflation should assist margins. At the same time, MS says investors have the option to "play the premium cycle" through brokers, AUB, PSC Insurance and Steadfast, which while more expensive, have growth options. (alice.uribe@wsj.com)

0207 GMT - Altium could find it harder to grow average revenue per user in mainstream printed-circuitboard design due to increased competition from Cadence, Citi analyst Siraj Ahmed says. Cadence's launch of its next-gen AI-driven design solution, and its partnership with Autodesk, could limit Altium's ability to increase the price for its Altium Designer product, the analyst writes in a note that. On the more positive side, Ahmed suggests that Altium Designer's popularity, the time it takes users to learn a new platform, and Altium's broader cloud capabilities could help delay any impact on the Australia-listed company. Citi has a neutral rating and target price of A$46.65 on the stock, which is up 1.4% at A$43.47. (stuart.condie@wsj.com)

0139 GMT - A cyclical ad-market recovery is probably needed before Nine Entertainment's advantages over its media peers are reflected in the company's share price, Morgan Stanley analyst Andrew McLeod writes in a note. He tells clients that Nine's diversified mix of broadcast, streaming, print and investment assets continues to hold appeal, with free cash flow and balance-sheet strength also distinguishing it from its peers. Yet weak advertising markets remain a concern and there is no sign of a near-term reversal in sentiment, he adds. MS cuts the stock's target price 13% to A$2.40 and stays overweight. Shares are up 1.3% at A$1.93. (stuart.condie@wsj.com)

0133 GMT - TPG Telecom's elevated debt levels mean that its decision to end talks with Vocus over a potential sale of its fixed-infrastructure assets incrementally increases risk to shareholders, Morgan Stanley analysts write in a note. They observe that Vocus's A$6.3 billion offer for the assets would have helped TPG reduce or restructure the debt, which was last reported at A$3.5 billion. The MS analysts anticipate a structural earnings decline for TPG's enterprise division, although they note TPG's insistence that it will explore other potential transactions in an attempt to generate value. MS has an equal-weight rating and A$5.60 target price on the stock, which is up 1.7% at A$4.89. (stuart.condie@wsj.com)

0121 GMT - Morgan Stanley analyst Andrew G. Scott remains skeptical on Incitec Pivot's chances of selling its fertilizers business. Like other analysts, Scott sees disrupted gas supply to Incitec's Phosphate Hill plant as an obstacle to a deal. Incitec Pivot indicated that due diligence has been completed, but Scott also points out that an overseas buyer would require approval by Australia's foreign investment regulator, which represents another hurdle. MS has an equal-weight rating and an A$3.29 target price on the stock, which is up 0.5% at A$2.955. (stuart.condie@wsj.com)

0042 GMT - Incitec Pivot's planned divestment of its fertilizers business is looking less likely amid operational issues at the Australian company's Phosphate Hill plant, Jarden analysts write in a note to clients. They tell investors that Incitec Pivot's announcement of another A$1 billion in capital returns is a positive, albeit one that had been largely anticipated by the market. They reckon that the key catalyst for a potential share-price rerate remains the sale of its fertilizers business, but believe that gas-supply issues, longer-term uncertainty about the cost economics of its sulphuric acid plant, and new maintenance work all increase uncertainty that the deal will progress. Jarden trims the stock's target price 5.3% to A$2.70 and retains a neutral call. Shares flat at A$2.94. (stuart.condie@wsj.com)

0036 GMT - ANZ managed costs well in FY 2023, in line with Jarden's estimates, but its analysts say that the Australian major lender can't escape sector-wide cost pressures ahead. While ANZ has given limited cost-related guidance, Jarden sees an implied cost growth of around 4.5% year on year. At the same time, although its ANZ Plus platform could lower costs, savings are unlikely to appear in the near term given the only gradual transition and long-dated migration, the analysts say in a note. Adjusting for lower margins, Jarden downgrades its FY 2024 earnings per share forecast by 4.7%. It keeps its overweight call, but lowers target by 2% to A$24.80. ANZ is down 3.3% at A$26.90.(alice.uribe@wsj.com)

0032 GMT - The decline in TPG Telecom shares that greeted the telecommunications provider's decision to cease asset divestment talks with Vocus offers what looks to Jarden analysts like a more attractive entry point for investors. Analysts Tom Beadle and Elise Kennedy make no changes to their A$5.40 target price since they hadn't incorporated potential upside from a divestment in their forecasts. They write in a note that any fixed-asset divestment would be complex and take time to resolve, but add that TPG could still engineer a regional mobile-network sharing or roaming deal with a rival provider, which represents a potential positive catalyst. Jarden upgrades the stock to buy from overweight. Shares are up 1.8% at A$4.895. (stuart.condie@wsj.com)

0011 GMT - ANZ's decision to win back market share in home loans may be a reason it hasn't outperformed rivals, Morningstar analyst Nathan Zaia says in a note. This is even as ANZ has a larger exposure to institutional and commercial lending and deposits than its peers, which aren't experiencing the same margin pressures as mortgages and retail deposits. Over FY 2023, ANZ grew home loans compared with market growth and lifted its market share. "On our forecasts for ANZ Group, return on equity falls to around 9.2% in fiscal 2024 from 10.9% in fiscal 2023," says Morningstar. "Subsequent aggressive mortgage pricing will get harder to justify and we expect it will ease over the next 12 months." (alice.uribe@wsj.com)

2340 GMT - ANZ is holding onto its competitive position in institutional banking, which UBS analyst John Storey reckons could surprise on the update. Despite this, sustained lending and deposit pressure in ANZ's retail business have had a greater than anticipated impact on margins, he says in a note. This prompts UBS to downgrade ANZ from buy to neutral. While UBS acknowledges ANZ's investment case appeal, it says there are some concerns that could see re-rating. These include ongoing investment in price to drive mortgage market share, which is negative to net interest margin, as well as term deposit pricing pressure. UBS cuts target 3.9% to A$25.00. ANZ is unchanged at A$24.69. (alice.uribe@wsj.com)

CBA may see earnings per share upgrades following the release of its 1Q FY 2024 update, say UBS analysts in a note. According to UBS calculations on the unaudited numbers issued by the Australian lender, net interest income was up 40 basis points quarter on quarter at A$5.74 billion, with 1Q net interest margins potentially showing some uplift when compared to 4Q FY 2023. At the same time, UBS sees asset quality holding up well supporting cash earnings. "Implied 2Q FY 2024 consensus suggests a cash earnings number of A$2.3 billion, which CBA is currently run rating well above," says UBS. (alice.uribe@wsj.com)

2300 GMT - CBA's 1Q FY 2024 update provides limited disclosure on net interest income, but Citi reckons management commentary implies a net interest margin of 2.03% which is around 2 basis points ahead of both Citi and consensus estimates, the investment bank's analysts say in a note. Citi reckons the market should take the slightly better NIM outcome well. "This better NIM was mitigated by likely lower volumes, as the loan book contracted over the quarter," Citi says. Overall, it sees that the market will think the 1Q results will be taken as relatively in-line, but as the stock has held up well coming into the update relative to peers, it may not be enough to justify the valuation premium. CBA closed flat on Monday. (alice.uribe@wsj.com)

2248 GMT - ANZ's institutional banking-led funding story may be on pause, while a push into mortgages is maintained, says Citi analysts in a note. For FY 2023, ANZ's cash earnings of A$7.41 billion were below both Citi and consensus expectations. Notably in the 2H, Citi says, momentum in the diversification story slowed as offshore deposits in Institutional declined sharply. "This led to their above system-mortgage growth needing to be funded by expensive domestic retail term deposits, crunching retail banking profitability," says Citi. With ANZ still looking to maintain mortgage growth, Citi downgrades cash earnings by 5%-6% in FY 2024-25, and lowers its revenue outlook.Additionally, it cuts ANZ to neutral from buy and lowers its target price 3.7% to A$26.00. ANZ was last down 3% to A$24.70. (alice.uribe@wsj.com)

2228 GMT - ANZ's chase for Australian home loan growth contributed to a larger earnings decline than expected in 2H FY 2023, says Morgans analyst Nathan Lead in a note. At the same time, the larger dividend size, but lower percentage franking also likely surprised investors. More positively, the Australian major lender's asset quality remained resilient and its capital strong, says Morgans. It makes a 3%-4% reduction to forecasts for pre-provision operating profit across FY 2024-26, driven partly by lowered net interest margin and higher operating expenses. Morgans says its key concern for the stock is ANZ's desire for acquisitions, which the broker reckons could bedestructive for shareholder value and/or increase the risk profile of the business. Morgans keeps its hold call on ANZ, but cuts its target price 4.5% to A$24.36.(alice.uribe@wsj.com)

2145 GMT - Jefferies wasn't surprised by Boral's newly upgraded earnings guidance, as the pipeline of work that will heavily require concrete and construction materials remains robust. Boral now expects underlying Ebit of A$300 million-A$330 million in FY 2024, up from a prior projection of A$270 million-A$300 million. In a note, analyst Simon Thackray adds that favorable weather and strong pricing outcomes are also supporting earnings. "We believe long-term Ebit margin target (>10%) will be achieved and A$500 million mid-cycle Ebit is possible, albeit some time away yet," says Jefferies, which rates Boral at hold. (david.winning@wsj.com; @dwinningWSJ)

0735 GMT - Ramsay Health Care's sale of its Asia-focused JV should aid deleveraging and give it more room to deal with headwinds it's been facing since the end of the pandemic, Fitch Ratings analysts say in a note. Ramsay and Sime Darby are selling the hospital unit to Columbia Asia Healthcare for about A$2.0 billion. Ramsay expects to use A$935 million of proceeds to repay debt of its funding group, and Fitch sees Ebitdar leverage improving to 3.5X and staying around or below that until at least FY 2027. That's well under the 4.0X mark at which Fitch may take a negative ratings action, supporting a stable outlook. An improved financial structure offers more time to restore profitability, as the initiatives Ramsay has taken are taking longer than expected to bear fruit, Fitch says. (fabiana.negrinochoa@wsj.com)

0431 GMT - Australia's major banks saw net interest margins increase by an average of 9 bps in FY 2023, according to KPMG analysis. It finds the average NIM for the lenders was 1.90% in 1H, and dropped to 1.84% in 2H. KPMG notes that margins are under pressure from intense pricing competition, particularly in the home loan market, and the rising cost of deposit and wholesale funding. On arrears, Maria Trinci, banking partner at KPMG Australia, says the major banks have reported a "modest rise." This, she says, may show higher rates and declining savings are hitting consumers. "However, this rise remains small and from a record-low base, demonstrating the resilience of Australian consumers and businesses to date," Trinci says. (alice.uribe@wsj.com)

(END) Dow Jones Newswires

November 13, 2023 23:01 ET (04:01 GMT)