0342 GMT - Deposit trends at Australian banks look strong, UBS analyst John Storey says in a note analyzing the monthly balance sheet data of Australian banks for December. For that month, UBS notes that deposit momentum continued, withtotal deposits rising 0.6% on month, driven by sound growth in both household and business deposits. Still, deposit growth among the major banks was mixed, with ANZ and Westpac notably outperforming peers, and with CBA and NAB lagging, UBS says. ANZ maintained its lead on mortgages in December, while CBA continued its comeback but still lost market share. Overall lending is growing in absolute terms, but the rate of growth is slowing, UBS says. (alice.uribe@wsj.com)

0148 GMT - Select Harvests is on track to remain within its covenants but things could change if almond market conditions deteriorate, UBS analyst Apoorv Sehgal says. He writes in a note to clients that, while almond prices are currently tracking above A$7.50/kilo, Select Harvests has previously acknowledged that a price of about A$7.00/kilo or a drop in yield would result in a breach of its fixed-charge covenant. He says that improving cost control is positive and that risk/reward looks balanced. UBS trims the stock's target price 6.7% to A$4.20 and stays neutral. Shares are up 0.8% at A$3.75. (stuart.condie@wsj.com)

0049 GMT - The a2 Milk Company's ongoing dispute with one of its suppliers is keeping Bell Potter analyst Jonathan Snape from becoming more positive on the stock despite signs of strength in the business. Snape tells clients in a note that the trend in 1H direct shipments to China has generally been reasonably solid. Yet he keeps a hold rating on the stock, citing a2's dispute with infant-milk formula supplier Synlait and the expanded scope of arbitration proceedings between the companies. Bell Potter raises its target price 6.2% to A$5.15. Shares are up 0.2% at A$4.84. (stuart.condie@wsj.com)

2355 GMT - China's tightening of export controls on graphite likely brings short-term pain, but long-term gain for Syrah Resources, signals UBS. The bank says China's October announcement, which reverberated through battery minerals markets, will help Syrah long term because it makes miners with production outside of China more essential. "But its immediate impact has been to sap confidence from China anode producers (and hence natural graphite demand)," analyst Dim Ariyasinghe says in a note. "To this extent, Syrah expects Chinese exports of anodes to be moderate in January 2024 before improving from February as export licenses continue to be granted." Syrah owns the Balama graphite mine in Mozambique, and UBS thinks its near-term production profile will be dictated by the evolution of China's export controls.(david.winning@wsj.com; @dwinningWSJ)

2349 GMT - IGO's Cosmos nickel project is likely to remain mothballed until FY 2027, reckons Morgan Stanley. IGO this week said it is putting Cosmos on care-and-maintenance in response to weak nickel prices. In a note, MS says the decision means IGO now has short nickel mine life, given its existing Nova operation is due to continue through 4Q of FY 2027 and Forrestania production is due to end this December. For Cosmos, MS assumes the project restarts in September 2026 with A$440 million of capex spent to achieve this between June 2026 and March 2028. (david.winning@wsj.com; @dwinningWSJ)

2319 GMT - Select Harvests looks significantly underpriced to Wilsons analysts as improving earnings expectations helps address concerns over the almond grower's ability to stay within covenants. While warning that full visibility on 2024 crop volume and quality is still a way off, they tell clients in a note that they are encouraged by news that the yield will be significantly improved on the prior year. The potential for lower on-year production costs is seen as a positive surprise. Select Harvests' balance sheet remains a focus, but the analysts reckon that confidence in the FY 2024 earnings outlook should ease worries. Wilsons stays overweight on the stock and lifts target price 6.3% to A$5.53. Shares are up 0.8% at A$3.75. (stuart.condie@wsj.com)

2303 GMT - Life360 would benefit from meaningfully lower operating expenses if European regulatory changes reduce the commissions it pays to Apple and Google over the medium term, Jefferies analyst Wei Sim writes in a note. Sim stresses that the changes are unlikely to benefit the family safety app developer in the short term, but notes that commissions have been increasing as a proportion of statutory operating expenses. Without changes, he sees this ratio rising to 21% in FY 2025, from 13% in FY 2022. A 5% decline in commissions would lift his adjusted Ebitda forecasts by 11% for FY 2024 and by 6% for FY 2025. Jefferies has a buy rating and A$12.00 target price on the stock, which is at A$7.75 ahead of the open. (stuart.condie@wsj.com)

2254 GMT - Life360's margins and earnings could be significantly improved by any reduction in the commissions paid by the family safety app developer to Apple, Goldman Sachs analyst Chris Gawler writes in a note. Gawler tells clients in a note that ASX-listed Life360 pays about 20% of its subscription revenue to Apple and rival Google. He reckons that each 100 basis-point reduction in commission could lift his Ebitda forecasts by 9% for fiscal 2024 and by 6% for fiscal 2025. Lower commissions are effectively a free option that would provide a meaningful boost to Life360's valuation, he adds. Goldman Sachs reiterates its buy rating and A$10.50 target price on the stock, which is at A$7.75 ahead of the open. (stuart.condie@wsj.com)

2251 GMT - Insurer Chubb's confidence in book growth with respect to pricing and volume, as well as margin improvement into FY 2024 is a positive read for ASX-listed QBE, say Goldman Sachs analysts Julian Braganza and Brian Kim in a note. Chubb recently reported its 4Q result, with key takeaways relevant for QBE's U.S. business. Chubb told investors commercial property and casualty rates and price increases across the majority of global portfolios were strong and exceeded loss costs. Goldman Sachs sees that Chubb comments on rate and strength of loss reserves reads positively for QBE. (alice.uribe@wsj.com)

2219 GMT - For Australian banks, a flattening of the yield curve is hurting margins on term deposits, Macquarie says. A shift in expectations over the path of interest rates has driven a decline in swap rates, including a 40 bps fall in 1-year swaps over the past three months. This has pushed 1-year term deposit spreads to the widest level since the pandemic, as banks largely left actual rates unchanged, Macquarie says. "We expect TD rate normalization to result in a 5-10 bps headwind on bank margins in FY 2024," Macquarie says. (david.winning@wsj.com; @dwinningWSJ)

2205 GMT - Mining services provider Perenti's share price has dropped some 28% since early December as investors worry about contract losses as nickel miners pare output and halt investments. Euroz Hartleys thinks the drop in Perenti's valuation is too steep, given the contract losses equate to A$10 million-A$15 million in annual Ebita. Perenti, for example, has an A$200 million, five-year contract with IGO for work at the Odysseus nickel mine. IGO this week said it will mothball the Cosmos operation, which includes Odysseus. In a note, analyst Harry Stevenson estimates Perenti's overall Australian nickel contract exposure at A$300 million annually. "We are comfortable with (the) outlook for remaining nickel contract exposure," says Euroz Hartleys, which has a buy call on Perenti's stock. (david.winning@wsj.com; @dwinningWSJ)

2129 GMT - Housing credit growth in Australia looks to have stabilized, Goldman Sachs analysts Andrew Lyons and John Li say in a note. In a review of regulator data, Goldman Sachs says housing credit growth was flat in December with year-on-year growth flat. December also marks the third consecutive month of unchanged growth, after sixteen consecutive months of deceleration. ANZ leads the major lenders in housing credit, followed by Westpac, NAB and Commonwealth Bank. On CBA, Goldman Sachs says the lender is lagging, but continues to accelerate when it comes to housing credit. For private credit, it was up 0.4% month-on-month in December, and is now tracking 4.7% year-on-year, which analysts see as adding further confidence that credit growth is likely to have troughed.(alice.uribe@wsj.com)

(END) Dow Jones Newswires

January 31, 2024 23:01 ET (04:01 GMT)