Month: October 2022

The Bank of Queensland Ltd (ASX: BOQ) share price will be on watch on Wednesday.

This follows the release of the bank’s full year results for FY 2022.

Bank of Queensland share price on watch following results release

• Statutory profit after tax up 15% to $426 million
• Cash earnings after tax down 5% to $508 million
• Net interest margin down 12 basis points to 1.74%
• CET1 ratio down 11 basis points to 9.57%
• Final dividend up 9% to 24 cents per share fully franked

What happened during FY 2022?

For the 12 months ended 31 August, Bank of Queensland reported a 5% decline in cash earnings after tax to $508 million.

This was driven by a 12-basis points reduction in its net interest margin, which reflects the impact of increasing competition and swap rate volatility. This offset flat operating expenses and a 7% increase in both housing loan growth to $4.4 billion and business loan growth to $1.2 billion.

In respect to the latter, housing loan growth was 1x system for the year, whereas small and medium (SME) business lending grew 1.5x system.

Bank of Queensland’s softer earnings didn’t stop the board from increasing its final dividend by 9% to 24 cents per share. This brought the bank’s full year dividend to a fully franked 46 cents per share, up 20% year over year from 39 cents per share in FY 2021.

How does this compare to expectations?

According to a note out of Goldman Sachs, its analysts were expecting the bank to report a modest 0.5% increase in cash earnings to $534.5 million.

This means that the bank’s cash earnings of $508 million has fallen well short of its estimates, which may not bode well for the Bank of Queensland share price today.

Though, positively, the broker was only expecting the bank to declare a final dividend of 23 cents per share. So, it has beaten on that metric.

Management commentary

Bank of Queensland’s managing director and CEO, George Frazis, was pleased with the bank’s results. He said:

BOQ’s financial results for FY22 highlight our progress on delivering quality sustainable profitable growth and reflect the sharp focus on the execution of our strategic plan. Today’s result demonstrates the disciplined execution of our strategy, the digital transformation program and ME integration and represents another period of improved underlying performance. This has been achieved during ongoing economic uncertainty, and as we bed down the integration of ME and upgrade our digital capability for our customers and our people.

We have advanced our strategy and have a clear pathway to 2025 which builds on the success of our execution to date on the digital transformation and the ME integration. We are a step closer to building a truly multi-brand, cloud-based, digital retail bank with the launch of myBOQ joining VMA on the new common core digital banking platform to enhance our customer experience. The integration program is well progressed with synergies ahead of plan and key milestones delivered during the year.

Outlook

While the bank acknowledges that it is operating in an uncertain environment, it still spoke positively about its prospects in FY 2023. It stated:

BOQ remains focussed on achieving quality, sustainable, profitable growth. Growth across all brands in FY22 provides a revenue tailwind moving in to FY23. We have positive NIM momentum, with tailwinds from rising interest rates partly offset by headwinds from rising funding costs.

Inflation and the costs of the new digital bank create near term headwinds for expenses, however, these will be partly offset by ongoing benefits from the integration and productivity programs.

The integration of ME is well progressed and we continue to execute against our strategic transformation roadmap. We have a clear pathway to the inclusion of ME on the digital bank platform and a plan to launch the new ME digital transaction and savings product and migrate existing ME deposit customers by the end of calendar 2023.

The post Bank of Queensland share price on watch following FY22 results appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• What’s the outlook for ASX dividend shares for the rest of 2022?
• Brokers name 3 ASX shares to buy today
• Is CBA the best ASX 200 bank share to buy for dividend income?
• Has the Bank of Queensland share price got 25% upside baked in?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nobody likes seeing their portfolio’s value drop. That defeats the purpose of investing. Unfortunately, this has been the case for many investors in 2022, as the stock market has been in a bear market since June of this year.

A bear market happens when one of the major indexes (usually the S&P 500) falls by 20% or more from recent highs. And that’s exactly what we’ve experienced. Since the beginning of 2022, the S&P 500 is down over 24%, the Nasdaq Composite Index is down over 32%, and the Dow Jones Industrial Average is down close to 20% (as of Oct. 8). So, to put it lightly, it’s been a rough year.

However, it isn’t all gray clouds for investors. In fact, bear markets are actually a necessary evil. That may sound backwards, but hear me out.

What controls stock prices?

In the short run, stock prices are a reflection of how investors feel. If a company reports good earnings and its stock price goes up, it’s not because of the earnings themselves; it’s because of how investors feel and react to the earnings. That’s why there are cases of companies reporting good earnings and their stock price dropping, and vice versa.

This is important because to really understand why bear markets are a necessary evil, you have to understand investor sentiment.

It comes down to risk vs. reward

The most fundamental principle in investing is that risk is tied to potential reward. The riskier an investment, the more an investor expects to be able to make. Investors don’t expect to receive large returns from Treasury bills, for example, because they’re as close to a risk-free investment as there is. However, stocks are one of the riskier investments, so investors expect the chance to make huge returns.

If the stock market never experienced bear markets and prices only went up, there would essentially be no risk. And the less perceived risk there is, the more investors are willing to pay for stocks because they don’t feel like they’ll lose money either way — which sets off a chain reaction. Stock prices keep rising because investors are willing to pay more in pursuit of big returns. price-to-earnings (P/E) ratio keep going up, and potential long-term future returns fall as a result. Rinse and repeat.

Since investors know that stock prices can drop and bear markets can happen, they “price” stocks with this risk in mind. This is a good thing because it keeps expected returns high. For long-term investors to make sizable returns over time, they almost need bear markets to happen occasionally.

Use bear markets to your advantage

Instead of viewing bear markets as negative, start viewing them as an opportunity. Specifically, they can be a chance to lower your cost basis, or the average price you’ve paid per share of a stock.

For example, if you used $1,200 to buy 10 shares, your cost basis would be $120 per share. If the stock price then fell and you bought 10 more shares for just $1,000, your new overall cost basis would be $110 per share:

• 10 shares * $120 = $1,200
• 10 shares * $100 = $1,000
• $2,200/20 shares = $110 per share

Your cost basis determines how much you profit (or lose) when you sell shares. Two investors can sell the same number of shares for the same price, but the one with the lower cost basis will profit more. As stock prices fall during bear markets, this may be a chance to get stocks for lower than your cost basis and set yourself up for greater profits in the future.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why bear markets are a necessary evil appeared first on The Motley Fool Australia.

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More reading

• Broker tips A2 Milk share price to jump 20%
• Experts name 2 ASX 200 dividend shares to buy now
• During a dismal quarter for the ASX 200, Sayona Mining shares stormed 60% higher. What’s next?
• What’s the outlook for ASX 200 tech shares in the second quarter?
• Despite recent volatility, Core Lithium shares delivered a 16% gain in Q1. Here’s how

Stefon Walters has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The A2 Milk Company Ltd (ASX: A2M) share price could be great value.

That’s the view of analysts at Bell Potter, which remain very bullish on the infant formula company.

What is the broker saying about the A2 Milk share price?

Bell Potter has been busy looking at the infant formula market and believes current trading conditions are supportive of its positive view on the A2 Milk share price. The broker commented:

Total landed IMF volumes (traditional + bonded volumes) into China were up +22% YOY in Aug’22 and are up +14% YOY on a R3M basis. China landed volumes found a floor in Apr’22 and have been improving since.

It also notes that input costs for infant formula companies are not getting out of control despite inflation.  It explained:

Our AUD index of commodity input costs has firmed in recent weeks, with implied NZD ingredient costs in 1H23e modestly higher than 2H22 averages.

Buy rating retained

In light of the above, the broker has retained its buy rating and $6.60 price target on the company’s shares. Based on the latest A2 Milk share price of $5.49, this implies potential upside of 20% for investors over the next 12 months.

Bell Potter summarised:

Our Buy rating is unchanged. If A2M can execute on its strategy to achieve ~NZ$2Bn in FY26e revenues and EBITDA margins in the teens, then it would imply compound double digit EPS growth through to FY26e. With an increased focus on direct channels to market (73% of 2H22 IMF sales) we see the offline expansion program as key to achieving these targets. In the near term directionally favourable YOY trends look to have returned to shipment indicators of IMF to China and the NZD weakness is creating a tailwind, given the majority of sales occur in AUD, USD and CNY.

The post Broker tips A2 Milk share price to jump 20% appeared first on The Motley Fool Australia.

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More reading

• What’s the outlook for A2 Milk shares in the second quarter?
• Why did the A2 Milk share price rocket 23% in the first quarter?
• How did the A2 Milk share price manage to beat the ASX 200 in September?
• A2 Milk share price drops despite buyback kicking off
• Macquarie reveals ASX 200 shares ‘more likely to outperform in a bear market rally’

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re an income investor, then you might want to read on. Listed below are two ASX dividend shares that have just been rated as buys by experts.

Here’s what they are saying about these top ASX 200 dividend shares:

Collins Foods Ltd (ASX: CKF)

The first ASX 200 dividend share that has been tipped as a buy is Collins Foods.

It is one of the largest operators of KFC restaurants in Australia, has a growing presence in Europe, and a smaller but growing network of Taco Bell restaurants across Australia.

But management isn’t settling for that. It sees plenty of room for growth in both the Australian and European markets, which could bode well for the company’s earnings and dividends in the coming years.

Morgans is very positive on the company’s outlook and has an add rating and $11.50 price target on its shares.

As for dividends, its analysts are forecasting fully franked dividends of 28 cents in FY 2023 and 31 cents in FY 2024. Based on the current Collins Foods share price of $8.48, this will mean yields of 3.3% and 3.7%, respectively.

Stockland Corporation Ltd (ASX: SGP)

Another ASX 200 dividend share that has been rated as a buy is Stockland.

It is a residential and land lease developer and retail, logistics and office real estate property manager.

Goldman Sachs is positive on the company and has a buy rating and $4.50 price target on its shares.

While Goldman accepts that trading conditions are tough, its analysts “believe the potential headwinds are factored into the share price and see SGP as attractively valued.” Particularly given its recently refreshed corporate strategy and the sale of its low returning Retirement division.

In respect to dividends, the broker is forecasting dividends per share of 27.6 cents in FY 2023 and 28.3 cents in FY 2024. Based on the current Stockland share price of $3.24, this will mean yields of 8.5% and 8.7%, respectively.

The post Experts name 2 ASX 200 dividend shares to buy now appeared first on The Motley Fool Australia.

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• Got $5,000? These 3 high-yielding ASX dividend shares still pay better than bonds

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Sayona Mining Ltd (ASX: SYA) shares skyrocketed in the first quarter of the 2023 financial year.

The ASX lithium share soared 60% between market close on 30 June and 30 September. In contrast, the S&P/ASX 200 Index (ASX: XJO) fell 1.43% during the same time frame.

Sayona is exploring lithium in Quebec, Canada and Western Australia. Let’s check what the company has been up to and what’s next.

Strong quarter

Sayona Mining shares soared 140% from 15 cents at close on 30 June to hit a high of 36 cents on 12 September. However, since then, Sayona shares have been falling.

The company’s share price gained 10% in one day on 4 August. At that time, Sayona announced lithium production at the North American Lithium (NAL) project was on track for quarter one, 2023.

The company also advised that 30% of the operation’s plant and equipment upgrade was complete. The project is a joint venture with Piedmont Lithium Inc (ASX: PLL).

Last month, Sayona Mining shares soared 38% between market close on 2 September and 12 September. On 7 September, Sayona advised it had awarded mining operator Fournier & Fils a four-year contract to supervise mining operations and services.

Sayona Mining managing director Brett Lynch said:

With both demand and pricing for lithium currently at all‐time highs, we are well placed at NAL to become the first supplier of spodumene in North America, paving the way to becoming the region’s leading supplier of lithium carbonate/hydroxide

Another highlight during the quarter was Sayona being added to the ASX 200 list on 19 September.

Looking ahead, a federal Industry, Science & Resources Department report has predicted the lithium hydroxide price to lift to US$51,510 a tonne in 2023. However, by 2024, prices are tipped to peg back to US$37,650 a tonne.

The report also highlighted global electric vehicle (EV) sales lifted 36% in the year to June 2022.

EV giant Tesla sold more EVs than ever before in September, the BBC reported this week. Lithium is a critical component of EV batteries.

If Sayona delivers on its production target for Q1 FY2023, it may be able to capitalise on high lithium prices.

Share price snapshot

Sayona Mining shares have surged 43% in the past year while they have jumped 65% year to date.

For perspective, the ASX 200 has fallen nearly 9% in the past year.

Sayona has a market capitalisation of nearly $1.8 billion based on the current share price.

The post During a dismal quarter for the ASX 200, Sayona Mining shares stormed 60% higher. What’s next? appeared first on The Motley Fool Australia.

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• Why is the Core Lithium share price in the green today?
• Why Cettire, Moneyme, Piedmont Lithium, and Superloop shares are racing higher
• Why is the Piedmont Lithium share price having such a stellar run on Tuesday?
• The Sayona Mining share price crashed 20% in September, but now…
• Good times keep rolling for ASX lithium shares on Thursday

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX 200 tech shares are broadly off to a strong start in the second quarter of the 2023 financial year (Q2 FY23).

The S&P/ASX 200 Index (ASX: XJO) is up 2.7% in the early days of Q2 FY23. Using that as our benchmark, let’s check how tech stocks are tracking since the end of September.

Embattled buy now, pay later (BNPL) stock Block Inc (ASX: SQ2), which acquired Afterpay in January, has handily beaten that return, gaining 4.9% so far in Q2.

Accounting software provider Xero Ltd (ASX: XRO) hasn’t managed to hold onto to some strong gains posted in the first week of the quarter. It’s currently down 0.5% since the closing bell on 30 September.

Meanwhile, ASX 200 tech share WiseTech Global Ltd (ASX: WTC), which provides cloud-based software solutions for the logistics sector, has also edged out the benchmark, up 3.8% so far in Q2.

And we’ll leave off with administration services company Link Administration Holdings Ltd (ASX: LNK), our top performer in Q2, up 10.8% so far.

How have these companies performed heading into the new quarter?

The first three quarters of the calendar year (as opposed to financial year, which ends on 30 June), were less than kind to ASX 200 tech shares.

Over the nine months through to 30 September:

• The Xero share price fell 49.7%
• The WiseTech share price dropped 13.3%
• The Square share price (commencing from its 20 January ASX listing) slid 52.1%, and
• The Link share price fell 49.7%

The benchmark index dropped 14.4% over the same period.

While there are company and sector-specific differences that impact these ASX 200 tech shares in unique ways, one factor threw up some gale-force headwinds for all.

Yep, we’re talking about central banks aggressively ratcheting up interest rates for the first time in more than a decade to combat soaring inflation.

This has seen the Reserve Bank of Australia (RBA) raise rates from the historic low of 0.10% to the present 2.60%. The US Federal Reserve has hiked rates to 3.25%, and other leading global central banks have also moved to rapidly raise their own rates.

What’s the outlook for ASX 200 tech shares in Q2?

With the interest rate dilemma in mind, the broad outlook for ASX 200 tech shares in the new quarter will hinge on the rate rises we see from the RBA and the highly influential Fed — and to a lesser extent other global central banks.

Tech stocks are particularly vulnerable to rate increases, as most of these companies are priced with distant future earnings growth in mind. As interest rates rise, so too does the present cost of investing in those future earnings.

As we wrote last week, 5 October, ASX 200 tech shares had a stellar two-day run “as signs emerge that a series of rate increases in the US, the world’s biggest economy, is having some impact on slowing the pace of inflation. That could mean the US Fed won’t need to hike rates as aggressively as the market has priced in”.

Their performance was further boosted by a lower-than-expected 0.25% rate hike from the RBA on 4 October.

But that picture was flipped upside down a few days later.

Yesterday, 10 October, ASX 200 tech shares led the charge lower.

Why?

Because the September jobs data out of the US, the world’s top economy, was stronger than expected. Unemployment is at 50-year lows and wages are growing at 5% annually.

This seemingly good news wasn’t good news for the rate-sensitive tech sector, as markets rapidly repriced in further sharp rate increases from the Fed.

Those expectations were bolstered by Fed Governor Christopher Waller. “Until we see any signs of inflation beginning to moderate, I don’t know how we pause,” he said.

So, investors wondering how ASX 200 tech shares are likely to perform in the new quarter would do well to keep a close eye on inflation expectations out of the United States and here in Australia.

Once central banks can start easing off their hawkish paths, the well-placed companies should enjoy some strong runs, like we just witnessed last week.

The post What’s the outlook for ASX 200 tech shares in the second quarter? appeared first on The Motley Fool Australia.

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More reading

• Despite recent volatility, Core Lithium shares delivered a 16% gain in Q1. Here’s how
• 5 things to watch on the ASX 200 on Wednesday
• A mortgage ‘battleground’ is coming. UBS names ASX 200 bank shares best placed to win
• Here are the top 10 ASX 200 shares today
• Could ASX 200 shares represent a ‘phenomenal opportunity’ right now?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc., Link Administration Holdings Ltd, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended Block, Inc., WiseTech Global, and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Core Lithium Ltd (ASX: CXO) share price saw multiple peaks and troughs over the first quarter of financial year 2022, ultimately closing the period 15.7% higher than it started.

There was plenty of news from the S&P/ASX 200 Index (ASX: XJO) lithium favourite in that time, with its stock’s major driver being an update on its exploration activities.

After ending June trading at 95.5 cents, the Core Lithium share price rocketed to reach $1.105 at the final close of September. For comparison, the ASX 200 gained 1.4% over the September quarter.

However, in that time, the stock hit an all-time high of $1.69 and a low of 82.5 cents – marking a variance of more than 100%.

So, what exactly has been going right for the Core Lithium share price lately? Let’s take a look.

What drove the ASX 200 lithium developer in Q1?

The Core Lithium share price had a good, albeit volatile, run in the first quarter of financial year 2022 as the company continued to prepare for the maiden sale of lithium from its Finniss Project.

It noted its plans to tender the project’s production on a digital exchange platform, as its ASX 200 lithium peer Pilbara Minerals Ltd (ASX: PLS) is known to do, late last month.

Additionally, it welcomed a new CEO following the shock exit of former managing director Stephen Biggins in March. Gareth Manderson took up the company’s reins in August after a 28-year stint in the mining and minerals sector.

Core Lithium also announced assay results from a diamond drilling campaign conducted at the Finniss’ BP33 deposit. In early August, the lithium developer reported the campaign found “world-class high-grade lithium intersections”.

Later that month, it revealed it had found gold at shallow depths at the project.

Finally, the company’s final close of the quarter was remarkably underwhelming for its share price, which was put in the freezer on 29 September. It was unfrozen last week on news of a successful $100 million institutional placement.  

Core Lithium share price snapshot

The Core Lithium share price has been on a roll lately.

As of the final close of September, the stock was 76% higher than it was at the start of 2022. It’s also currently 165% higher than it was 12 months ago.

Meanwhile, the ASX 200 has dumped 12% year to date and 9% over the last 12 months.

The post Despite recent volatility, Core Lithium shares delivered a 16% gain in Q1. Here’s how appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• A mortgage ‘battleground’ is coming. UBS names ASX 200 bank shares best placed to win
• Here are the top 10 ASX 200 shares today
• Why is the Core Lithium share price in the green today?
• Could ASX 200 shares represent a ‘phenomenal opportunity’ right now?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Tuesday, the S&P/ASX 200 Index (ASX: XJO) had a poor day and dropped into the red. The benchmark index fell 0.35% to 6,645 points.

Will the market be able to bounce back from this on Wednesday? Here are five things to watch:

ASX 200 expected to fall

The Australian share market looks set to fall again on Wednesday after another poor night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 25 points or 0.4% lower this morning. In late trade on Wall Street, the Dow Jones is down 0.1%, the S&P 500 is down 0.95%, and the Nasdaq is down 1.55%.

Oil prices drop

Energy shares Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a tough day after oil prices pulled back overnight. According to Bloomberg, the WTI crude oil price is down 3.1% to US$88.31 a barrel and the Brent crude oil price has fallen 2.8% to US$93.49 a barrel. Global recession fears and a COVID outbreak in China weighed on prices.

Bank of Queensland results

The Bank of Queensland Ltd (ASX: BOQ) share price will be on watch today when the regional bank releases its full year results for FY 2022. A note out of Goldman Sachs reveals that its analysts are expecting the bank to report a modest 0.5% increase in cash earnings to $534.5 million. This is expected to allow the Bank of Queensland board to declare a final dividend of 23 cents per share.

Gold price edges higher

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a better day after the gold price edged higher overnight. According to CNBC, the spot gold price is up 0.1% to US$1,677.2 an ounce. Gold rose slightly after the US dollar softened.

Commonwealth Bank AGM

The Commonwealth Bank of Australia (ASX: CBA) share price could be worth watching today. That’s because Australia’s largest bank is holding its annual general meeting. And while it doesn’t usually provide a trading update at the event, it could provide some commentary on current operating conditions and the impact that rising rates are having on its margins.

The post 5 things to watch on the ASX 200 on Wednesday appeared first on The Motley Fool Australia.

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More reading

• A mortgage ‘battleground’ is coming. UBS names ASX 200 bank shares best placed to win
• Looking to buy CBA shares? Here’s what to watch at tomorrow’s AGM
• Here are the top 10 ASX 200 shares today
• Own CBA? Here’s why you should also buy NAB shares: expert
• Could ASX 200 shares represent a ‘phenomenal opportunity’ right now?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX 200 bank shares have had a difficult year on the charts, encountering substantial volatility.

Following a strong start to the year in January, the banking basket has travelled largely sideways to date.

As seen in the chart below, the S&P/ASX 200 Banks Index (ASX: XBK) has wormed its way to around a 5% loss in 2022 so far.

Buying opportunities?

Despite the market volatility, and mounting pressure on the financials sector from the recent surge in interest rates, some analysts think selective opportunities remain in the ASX 200 banking space.

However, some experts are warning the market mechanics of the Australian residential mortgage market could create a potentially dire situation.

Analysts at investment bank UBS, led by John Storey, allude to this theme in a recent note to clients. The broker highlights that around $500 billion in fixed-rate mortgages are set to roll over by 2024. That’s approximately 25% of the entire Australian mortgage book.

The flood of consumers facing residential interest rates at their highest levels since 2013 may trigger a “battleground” scenario, UBS warns.

In any case, it will create an impending headwind that households must endure, the note said, although the broker is broadly optimistic:

Overall, we are cautious on the impact of weaker housing and interest rates but customers, in our view, can take it.

We are positive on the net interest margin environment, but competition will take some of the edge off likely increases.

Despite this, the “flow-on effects” to small and medium-sized businesses need to be closely examined, it said.

Nevertheless, the broker came in with a string of upgrades this week and believes the trio of Macquarie Group Ltd (ASX: MQG), Westpac Banking Corporation (ASX: WBC), and Bendigo and Adelaide Bank Ltd (ASX: BEN) are well positioned to capitalise on this mortgage activity.

It upgraded the three shares to buys on valuations of $185, $27, and $10 respectively, with each price target representing considerable upside on their current share prices.

What do the numbers say?

In terms of where these shares sit in the ASX 200 banking basket, some numbers are seen below, taken from Refinitiv Eikon data.

Bendigo looks attractively priced at 0.68 times price-to-book (P/B) ratio with a 7.5% company return on equity (ROE).

In addition, USB’s picks are all forecast to deliver solid dividend yields looking ahead, according to Refinitiv. Let’s check the figures:

Company Name	P/E	P/Book	Dividend yield	ROE
Westpac Banking Corp	15.75	1.07	7.9%	7.4%
Australia and New Zealand Banking Group Ltd	10.72	1.09	8.4%	10.9%
Commonwealth Bank of Australia	17.54	2.22	5.7%	12.8%
National Australia Bank Ltd	14.81	1.56	6.6%	11.1%
Bendigo and Adelaide Bank Ltd	10.50	0.68	9.3%	7.5%
Bank of Queensland Ltd	10.85	0.68	9.1%	7.9%
Macquarie Group Ltd	12.96	2.06	4.5%	18.0%

A comparison of each bank’s share price performance over the last 12 months, relative to the benchmark index, is illustrated below.

The post A mortgage ‘battleground’ is coming. UBS names ASX 200 bank shares best placed to win appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
• Morgans names 2 ASX 200 blue chip shares to buy
• Can perennial ASX 200 banking bridesmaid Westpac finally find love?
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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Bendigo and Adelaide Bank Limited. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Commonwealth Bank of Australia (ASX: CBA) share price is under the microscope this week as the big S&P/ASX 200 Index (ASX: XJO) bank share holds its annual general meeting (AGM).

AGMs are important – not only do shareholders get to vote on certain matters, such as directors, but other issues can also be raised. Plus, the company’s leadership can tell shareholders about expectations and perhaps performance for the year ahead.

Banks are increasingly coming under pressure to limit their lending to fossil fuel businesses. Indeed, that’s one of the things that shareholders will be voting on.

Climate resolution

There has been a resolution put to CBA by Market Forces that calls for banks like CBA to “disclose information demonstrating how their financing will not be used for the purposes of new or expanded fossil fuel projects”.

Market Forces pointed out that the big four banks of CBA, Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), and National Australia Bank Ltd (ASX: NAB) recently co-financed a $1.4 billion deal for Santos Ltd (ASX: STO) for the Barossa gas project.

Market Forces notes that funding these fossil fuel projects is happening even though CBA, NAB, and Westpac said they were going to restrict some direct financing for new oil and gas fields.

Will van de Pol, asset management campaigner from Market Forces, said:

Despite committing to support the Paris Agreement and net zero emissions by 2050, all of Australia’s big four banks are still financing companies with coal, oil and gas expansion plans that undermine those climate goals.

It’s unacceptable to a growing number of retail shareholders and institutional investors that Commonwealth Bank, ANZ, NAB and Westpac are exposing themselves to heightened risk by financing companies that are worsening the climate crisis.

However, reporting by the Australian Financial Review suggests that CBA shareholders may reject that proposal.

What might affect the CBA share price?

It could be one of the most interesting AGMs of the past decade, and it could influence the CBA share price.

We’re in a very different time now compared to the start of the year when interest rates were a lot lower.

CBA is the biggest lender in Australia. It has a huge loan book that is focused on mortgages.

With the lending rate cranking up at a very fast pace, there has been a lot of focus on how much this could help CBA’s net interest margin (NIM). That’s the profit that a bank makes on its lending, comparing the loan rate to the cost of funding (such as savings accounts).

If CBA tells investors about what its expectations for the NIM are for FY23, it would be very illuminating for how much profit it could generate and whether competition in the lending space is still detracting from lending profit. A higher NIM could be helpful for the CBA share price.

I’ll be curious to see how optimistic, or not, the comments from the CBA boss are. If he talks about households and businesses still being in a strong financial position, then that could suggest the Reserve Bank of Australia (RBA) will need to keep going to rein in spending and inflation.

If the commentary is muted and cautious, then that may be good news for the RBA. But, it could also raise questions about future loan arrears in 2023.

We live in interesting times, so it’ll be curious to see how much colour we actually get from CBA tomorrow. Either way, one expert thinks that CBA is the ‘go-to’ bank as an investment.

The post Looking to buy CBA shares? Here’s what to watch at tomorrow’s AGM appeared first on The Motley Fool Australia.

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• Is CBA the best ASX 200 bank share to buy for dividend income?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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