Category: Stock Market

The Allkem Ltd (ASX: AKE) share price is having a strong session.

In morning trade, the lithium miner’s shares are up over 3% to $10.62.

However, despite this, the Allkem share price remains down materially from its record high of $16.75.

Can the Allkem share price keep rising?

The good news is that despite being bearish on lithium prices and forecasting them to pullback significantly next year, Goldman Sachs is very bullish on Allkem’s shares.

This is due to its belief that the company’s production growth and downstream optionality will keep its earnings strong and offset the pressure caused by lower lithium prices.

According to a note from Monday, its analysts have retained their buy rating and $15.40 price target on its shares. This implies potential upside of 45% for investors from current levels over the next 12 months.

Commenting on its production growth, the broker said:

Allkem has one of the best production outlooks in our lithium coverage, with broad-based growth optionality, second only to Mineral Resources on an LCE basis when including downstream hydroxide production on an equity basis. This drives our forecast for the company’s equity LCE production growth of >4x by FY27E, supporting earnings rebounding to near current record levels despite the declining lithium price environment.

In addition, the broker highlights that the market is undervaluing its assets. This is despite its competitive brine cost curve position. It adds:

Allkem has the largest lithium metal contained resource base amongst our coverage when factoring in South American brine assets and second largest reserve (excluding Olaroz due to ongoing reserve re-modelling). However, AKE’s aggregate resource is trading at a significant discount to peers, despite a competitive brine cost curve position.

All in all, Goldman appears to see recent weakness in the Allkem share price as a great buying opportunity for investors.

The post Allkem share price can jump 45% even if lithium prices fall: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• These ASX lithium shares are a buy despite explosive supply forecast: UBS
• Leading brokers name 3 ASX shares to buy today
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• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has positions in Allkem. 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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The current ANZ Group Holdings Ltd (ASX: ANZ) share price is low enough that it could offer an exceptionally high dividend yield.

The ASX dividend share has seen a 12% fall since 9 February 2023.

When a share price falls 10%, it boosts the dividend yield by 10%. For example, if the dividend yield used to be 9%, and the share price falls 10%, then the dividend yield becomes 9.9%.

First, let’s look at how much passive income ANZ shares are expected to pay out in FY23.

Dividend projection

The dividend forecast on Commsec suggests that ANZ shares could pay an annual dividend per share of $1.60 in the 2023 financial year.

At the current ANZ share price, this projected dividend could equate to a grossed-up dividend yield of 10% in FY23.

In fact, Commsec numbers are suggesting that the dividend could increase further in FY24 to $1.64 per share and rise again in FY25 to $1.65 per share.

Those predictions mean that the ANZ grossed-up dividend yield could be 10.3% in FY24 and 10.4% in FY25.

So, a double-digit yield is projected for this financial year and the following two financial years.

Is this a good time to buy ANZ shares?

For investors that want to buy ANZ shares, then this is one of the better times of the last 52 weeks to consider buying shares. It has been a lot higher than today over the last year.

There is a lot of volatility going on in the global share market, particularly with banks.

I’m not an expert on the banking problems in the northern hemisphere, but I think the recent examples of Silicon Valley Bank and Credit Suisse have shown how quickly things can go wrong.

I don’t believe ANZ, or any of the S&P/ASX 200 Index (ASX: XJO) bank shares, are as vulnerable because Australian banks are well-capitalised. They were strong during the COVID-19 period and that seems to be continuing.

The ASX bank share revealed that at 31 December 2022, its common equity tier 1 (CET1) ratio was 12.2%.

It also revealed that its credit quality was good. Looking at the loans that were at least 90 days past due, as a percentage of the overall portfolio, it “continued to reduce” – there was a drop in arrears of the Australian housing portfolio, down 3 basis points to 55 basis points in the first quarter of FY23.

ANZ also reported a $7 billion increase in Australian net loans and advances over the three months to 31 December 2022. It also saw that all divisions experienced an increase in customer deposits, including increased flows into term deposits.

The ASX bank share is also benefiting from higher interest rates because its boosting ANZ’s lending margins.

However, this may be the best it gets in terms of operating conditions. I think arrears are going to increase as a result of the much higher interest rates. There may also be the potential for lending competition to lower the sector’s lending margins again.

My conclusion on the ANZ share price

I don’t think it’s going to get much better for ANZ’s earnings from here. I’m not sure there’s going to be much benefit from the Suncorp Group Ltd (ASX: SUN) banking acquisition in per-share terms. I think it could be a distraction for management.

ANZ shares could offer very large dividend income because it’s only valued at 9 times FY23’s estimated earnings, according to Commsecs. But, I wouldn’t expect much profit growth in FY24 or FY25 compared to FY23. It looks cheap, and it may benefit from a valuation boost from this low level. But I think there are other ASX dividend shares that could achieve stronger long-term growth.

The post ANZ shares could offer a dividend yield of 10% in FY23, is it a buy? appeared first on The Motley Fool Australia.

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More reading

• Which ASX 200 big four bank share could be the safest to hold?
• ASX 200 bank shares shrug off global banking turmoil to leap higher
• Forget term deposits and buy these ASX 200 dividend shares: analysts
• Where I would go hunting for defensive ASX 200 shares with upside
• 2 ASX 200 bank shares to buy after the selloff: experts

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 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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Domino’s Pizza Enterprises Ltd (ASX: DMP) shares have dived in the last month, but is now the time to buy?

The Domino’s share price has fallen 31% in a month and is now fetching $48.71. However, in Tuesday’s trade, the company’s share price lifted 5.57%. For perspective, the S&P/ASX 200 Index (ASX: XJO) lifted 0.83% yesterday.

Let’s take a look at the outlook for Domino’s in the next 12 months.

Can Domino’s shares go higher?

Analysts at Barrenjoey have upgraded Domino’s to an overweight rating from neutral.

Domino’s shares appeared to rebound yesterday on the back of this news, as my Foolish colleague James noted.

The pizza chain operator’s shares have fallen to an attractive level, Barrenjoey believes.

Barrenjoey has placed a $59 price target on Domino’s shares over 12 months. This implies an upside of 21% based on Tuesday’s closing price.

Analysts believe Domino’s margins will recover as inflation pressures ease, the Financial Review reported.

The Domino’s share price hit an all-time high of $161.98 in September 2021. Barrenjoey founding principal Tom Kierath believes it may not reach this level again before 2030. He said:

While it may not see those levels this decade, at $45 we think the market is currently pricing significantly lower growth.

The team at Morgans has also recently placed an add rating on Domino’s with a $70 price target. Morgan’s is also optimistic Domino’s could recover as inflation alleviates.

Domino’s reported a 14.3% drop in earnings before interest, tax, depreciation and amortisation (EBITDA) in the first half of FY23. The company’s board cut the company’s dividend by 23.8% to 67.4 cents per share.

Domino’s share price snapshot

The Domino’s share price has descended 42% in the past 52 weeks and 26% year to date.

Dominos has a market capitalisation of about $4.3 billion at the current time.

The post Time to bite into ‘cheap’ Domino’s shares: expert  appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
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• Warren Buffett rakes in $9 billion in annual dividend income. Should I buy ASX dividend shares right now?
• 3 ASX growth stocks down 40%-65% to buy now and hold
• These 3 ASX shares just halved. I would buy one of them: experts

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 positions in and has recommended Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Domino’s Pizza Enterprises. 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 looking for dividends, then the ASX 200 shares listed below could be worth considering.

Here’s why analysts at Goldman Sachs say these ASX 200 dividend shares are right now:

Telstra Corporation Ltd (ASX: TLS)

The first ASX 200 dividend share to look at is telco giant Telstra.

After many years of struggling, Telstra is back on form and targeting solid and sustainable growth over the coming years. This will be underpinned by its T25 strategy, which has just replaced the very successful T22 strategy.

Goldman Sachs is a fan of the company and believes it is well-placed in the current environment thanks to rational competition, price increases, and its cost cutting plans.

The broker is expecting this to lead to fully franked dividends of 17 cents per share in FY 2023 and then 18 cents per share in FY 2024. Based on the current Telstra share price of $4.12 this equates to yields of 4.1% and 4.35%, respectively.

Goldman has a buy rating and $4.60 price target on the company’s shares.

Westpac Banking Corp (ASX: WBC)

Another ASX 200 dividend share that has been tipped as a buy is Westpac.

Although there are concerns over the state of the global banking sector, Goldman Sachs believes Australian banks are safe from the crisis. It highlights the strong liquidity that the big four banks have in comparison to requirements.

In light of this, the broker continues to believe that Westpac is well-placed to deliver solid earnings growth in the coming years. This is thanks to its cost reduction plans and positive exposure to rising interest rates.

Goldman expects this to lead to fully franked dividends of 147 cents per share in FY 2023 and 156 cents per share in FY 2024. Based on the current Westpac share price of $21.42, this will mean yields of 6.85% and 7.3%, respectively.

Goldman Sachs has a conviction buy rating and $27.74 price target on its shares.

The post Buy these ASX 200 dividend shares for income: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Which ASX 200 big four bank share could be the safest to hold?
• Want high income right now? These are the ASX dividend shares I would buy
• Boost your passive income with Westpac and this ASX 200 dividend share: experts
• ASX 200 bank shares shrug off global banking turmoil to leap higher

Motley Fool contributor James Mickleboro has positions in Westpac Banking. 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 Telstra Group. The Motley Fool Australia has recommended Westpac Banking. 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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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Capital H Management portfolio manager Harley Grosser casts his eyes over three ASX shares that are now going for a huge discount.

Bargain buy or value trap?

The Motley Fool: Let’s examine three ASX shares that have been devastated this year, and see if you think each of these fallen stars is now a bargain to pick up or if you’d stay away.

The first one is Mighty Craft Ltd (ASX: MCL), a small-cap ASX stock that’s plunged about 40% since last Easter.

Harley Grosser: Mighty Craft’s an incubator and investor in beverage brands. We have met with them and quite like the business. Their star brand is Better Beer, which was started by the social media group Inspired Unemployed, which has got a massive following online. They just actually announced a restructure there, but Mighty Craft [still] owns 33% of Better Beer. 

So we don’t own Mighty Craft at the moment. But I think if you watch the performance of Better Beer, that’s probably the key there. Because if they continue on this trajectory, which has been just phenomenal growth every month, then MCL’s a relatively cheap way to gain exposure there.

I think there were a couple of options — [one] was to sell their stake and cash out, but it seems like Better Beer’s decided to raise more money and go even harder. So we don’t own it, but we’ll keep watching how Better Beer performs.

MF: I’m not a beer drinker myself, so I don’t fully understand how such a small brand can take off so fast.

HG: Yeah, me too. I don’t drink it either, but I have a lot of mates that all of a sudden have stocked their fridges with Better Beer, so they’re doing something right.

MF: Next one is Dusk Group Ltd (ASX: DSK), which is down about 40% since last Easter as well.

HG: Yeah, they’re a candle retailer and they’ve got a good business in their own niche. 

We took a view that we would just be avoiding retailers completely, probably around April of 2022 when we started to get concerns around inventory positions. And to be fair to retailers, it must have been a very hard time to manage inventory from the switch from in-store to online, then back now to in-store. 

But on the other side of that, we’re happy to start looking at opportunities, and I think Dusk is a good brand and it’s a business that we would own at the right price. 

Their first half numbers were still a little bit messy as everything normalises, but it’s on our radar as one we would buy if it got to the right price. But it’s not there yet for us.

MF: The third one is Redbubble Ltd (ASX: RBL), which has really taken a hammering. It’s down 93% since the start of last year. What do you think?

HG: Yeah, we never invested in Redbubble. Years ago we looked at it and we did talk to some of the artists that used the platform, and we didn’t think it was going to be a long-term winner. 

And then COVID just proved us really, really wrong there. The stock just took off. Obviously, since then, it’s all unwound. 

For us, I know it’s probably not the perfect answer, but we like to invest in [a] business that we can understand and then have a reasonable chance of forecasting. So Redbubble’s been smashed and it might be the bargain of century, but it’s too hard for us to try to model out what it looks like in three, four, five years. 

So it might look cheap, but it’s just one that we have to put in the “too hard” basket and say no to.

The post Here’s one hot, one lukewarm and one cold ASX share: fundie appeared first on The Motley Fool Australia.

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• 3 ASX All Ords tech shares rebounding strongly from the SVB fallout (and 2 still tumbling)
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Motley Fool contributor Tony Yoo has positions in Dusk Group and Redbubble. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Redbubble. The Motley Fool Australia has recommended Dusk Group. 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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There are some compelling S&P/ASX 200 Index (ASX: XJO) dividend shares that have been sold down over the last year or two. With an expected recovery of earnings and dividends in the coming years, they could be leading opportunities to consider today.

One of the most useful things about a share price decline is that it boosts a share’s future dividend yield.

For example, if a business with a 6% dividend yield suffers a 10% drop, the dividend yield becomes 6.6%. Plus, buying at a lower price is more attractive and more likely to produce positive capital returns.

With that in mind, there are two ASX 200 dividend shares that could be turnaround ideas.

Inghams Group Ltd (ASX: ING)

Many readers may know of Inghams as one of Australia’s largest poultry businesses. To put into context how much chicken we’re talking about, the comany’s FY23 first half revealed that its group core poultry volume was 235.7 kilotons (kt).

The business recently reported its FY23 half-year result. It showed that underlying net profit after tax (NPAT) was down 13.1% year over year to $26.6 million, but it was an increase of 885.2% half-on-half.

Inghams has been dealing with various operational challenges, including supply chain disruptions and broad inflationary pressures. But, it’s now starting to recover and says that strong long-term demand remains with “key long-term trends intact”.

It’s seeing “healthy growth in poultry demand” as customers return to pre-COVID patterns. It’s also benefiting from a favourable pricing environment, so Inghams is benefiting from a higher average selling price. The poultry business said that it will “pass on further price increases as required”.

Ingham’s half-year dividend was 4.5 cents per share.

With the ongoing recovery, the business is expected to achieve earnings per share (EPS) growth and dividend growth to FY25.

Using the current Commsec estimates, the Inghams share price is valued at under 12x FY25’s estimated earnings, with a possible FY25 grossed-up dividend yield of 8.2%.

As one of the biggest operators in the country, I think it has a number of scale benefits which other competitors may find hard to compete with.

Pinnacle Investment Management Group Ltd (ASX: PNI)

Pinnacle is a business that invests in fund managers in Australia, and has recently expanded to internationally-based fund managers too.

The ASX 200 dividend share provides seed funding, global institutional and retail distribution, and industrial grade middle office and infrastructure. Taking care of back office tasks allows fund managers to focus on delivering investment returns to clients.

The Pinnacle share price is down around 30% from 18 January 2023 and almost 60% lower from November 2021.

It makes sense the fund manager is suffering during a period of market volatility and declines, because these conditions are hurting the funds under management (FUM). In turn, the lower FUM hurts the revenue and NPAT.

However, I don’t think the share market is going to be declining forever, nor do I think the investment environment will be uncertain forever. I believe there will be better times ahead for fund managers.

The ASX 200 dividend share’s profit is expected to rise in FY24 and FY25.

According to Commsec, the Pinnacle share price is valued at 18x FY24’s estimated earnings and 16x FY25’s estimated earnings. The FY25 grossed-up dividend yield could be 7.6%.

The post Why I think these 2 ASX 200 dividend shares offer excellent buying right now appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• Guess which ASX 200 director has bought $50m worth of shares in a fortnight?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• 1 reason to avoid the stock market, and 3 great reasons to invest today

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 positions in and has recommended Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group. 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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While some sectors and companies might not be considered “fashionable”, ASX investors can’t let such prejudices cloud their judgement.

Because if you want your portfolio to grow, all that matters are the prospects for the businesses.

Even if the goods or services produced are “boring”, if they are essential to the lives of consumers then the associated ASX shares have to be at least considered.

That case is even more pertinent in 2023 as the Australian and global economy battle very dark clouds.

As an example, Marcus Today market analyst Matthew Lattin named two ASX shares this week that he would buy right now:

‘We anticipate organic growth’

It doesn’t get much more unfashionable than insurance. 

But the reality is that it’s a reliable sector in times of turbulence. 

Insurance is a service that still sees strong demand through tough economic times, and insurers earn superior returns on collected premiums when interest rates are high.

Lattin thus likes the look of QBE Insurance Group Ltd (ASX: QBE).

“QBE’s recent underwriting performance against a backdrop of heightened inflation, geopolitical tensions and elevated catastrophes demonstrates resilience,” Lattin told The Bull.

“We anticipate organic growth and increasing premiums moving forward.”

The numbers coming out of reporting season last month were positive.

“Gross written premiums of US$20.054 billion in fiscal year 2022 were up 13% on the prior corresponding period,” said Lattin.

“Statutory net profit after tax rose from US$750 million in fiscal year 2021 to US$770 million in fiscal year 2022.”

The QBE share price has risen 27% over the past 12 months, while paying out a dividend yield of 2.8%.

Signs of a massive turnaround 

It’s been tough going for TPG Telecom Ltd (ASX: TPG) shares.

The company listed on the ASX in July 2020 after a merger of TPG and Vodafone Australia. Unfortunately, the stock has lost a painful 42.6% from the closing price on its first day.

Telecommunications might be a service with evergreen demand, but it’s not easy competing as the number three player in a country with a fairly small population.

But the stock is showing signs of life in 2023, heading up 2.58% year to date.

“In our view, TPG has significant growth potential.”

Lattin thought the results from reporting season were “relatively strong”.

“Service revenue of $4.439 billion was up 1.5% on the prior corresponding period,” he said.

“Mobile subscribers grew by 300,000 in 2022. Average revenue per user for mobiles was up 1.9% to $32.40 a month, mostly reflecting higher international roaming levels.”

Earlier this month Morgans analyst Andrew Tang agreed with Lattin’s bullishness on TPG.

“This was the first time since merging that positive earnings momentum is obvious across the group.”

The post ‘Significant growth potential’: Expert names 2 unfashionable ASX 200 shares to buy appeared first on The Motley Fool Australia.

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More reading

• Boost your passive income with Westpac and this ASX 200 dividend share: experts
• ‘Turning point’: Fundie names 2 great-value ASX 200 shares to buy now
• 5 things to watch on the ASX 200 on Wednesday
• 4 ASX 200 shares trading ex-dividend on Wednesday
• ‘A rocky road ahead’: Expert names 2 ASX 200 shares to thrive in a tough 2023

Motley Fool contributor Tony Yoo 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 Tpg Telecom. 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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S&P/ASX 200 Index (ASX: XJO) gold shares have enjoyed some heady tailwinds amid the banking crisis gripping the United States and Europe.

Angst over potential bank failures has seen gold retain its shine as investors turn to the yellow metal for its classic haven status.

Any rise in the gold price is, as you’d expect, good news for the big Aussie gold miners.

And gold edged higher again on Tuesday, closing the day trading for US$1,984 per ounce, up from US$1,977 per ounce on Monday.

Despite that 0.4% increase, the Northern Star Resources Ltd (ASX: NST) share price closed the day down 1.52%.

However, rival ASX 200 gold share Newcrest Mining Ltd (ASX: NCM) finished up 0.62%, while the Evolution Mining Ltd (ASX: EVN) share price gained 2.1%.

Following Monday’s meteoric share price gains, these three ASX 200 gold shares are all well into the green over the past five trading days. Here’s how they’ve performed since this time last week (as at yesterday’s close):

• Northern Star shares are up 6.7%
• Newcrest Mining shares have gained 5.4%
• Evolution Mining shares are up 6.3%

But there could be more good news to come for ASX 200 gold shares.

More tailwinds ahead for ASX 200 gold shares?

Bullion traded at all-time highs of $2,075 per ounce in August 2020 during the early months of the global pandemic as investors sought a safe place to park their wealth. That record level offered ASX 200 gold shares some outsized profits at the time.

Gold briefly touched US$2,000 per ounce on Monday amid ongoing concerns over the Swiss government-backed deal for UBS to takeover Credit Suisse.

Some smaller US banks also remain vulnerable. That includes First Republic Bank (NYSE: FRC), which closed down 47% on Monday.

Now global central banks are stepping in to provide liquidity for their stressed banks. And analysts are now expecting fewer rate rises from those same core central banks.

This combination could well see gold set new all-time highs, according to Sprott Inc CEO Whitney George (courtesy of Bloomberg).

“I certainly think we’re on our way to new highs,” George said. He noted that following market downturns, “The minute liquidity is restored back into the global market, gold seems to always be the first thing to recover, and then often hits new highs.”

Even just edging into new record territory would mean a 5% increase from the current price of bullion, which would be welcome news for ASX 200 gold shares.

The post Why ASX 200 gold shares could see the yellow metal hit new record highs: expert appeared first on The Motley Fool Australia.

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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 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) returned to form and pushed higher. The benchmark index rose 0.8% to 6,955.4 points.

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

ASX 200 expected to rise

The Australian share market looks set to continue its recovery on Wednesday following a solid night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 60 points or 0.85% higher this morning. In late trade on Wall Street, the Dow Jones is up 1%, the S&P 500 is up 1.45% and the Nasdaq is 1.7% higher.

Oil prices climb

Energy producers Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a good session after oil prices climbed overnight. According to Bloomberg, the WTI crude oil price is up 2.75% to US$69.50 a barrel and the Brent crude oil price has risen 2% to US$75.27 a barrel. Oil prices rebounded after banking crisis fears eased.

New Hope shares are a buy

The team at Morgans has reiterated its bullish view on New Hope Corporation Limited (ASX: NHC) shares. In response to the coal miner’s half-year results, the broker has reiterated its buy rating with a $6.35 price target. It believes that “windfall returns of surplus capital (in time) are on offer for patient/ value investors.”

Gold price falls

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a poor day after the gold price dropped overnight. According to CNBC, the spot gold price is down 2.1% to US$1,941.6 an ounce. Traders were selling gold ahead of the US Federal Reserve’s interest rate decision.

Goldman Sachs on ASX 200 banks

Analysts at Goldman Sachs remain confident in the health of the Australian banking sector and have reiterated their conviction buy rating and $27.74 price target on  Westpac Banking Corp (ASX: WBC) shares. Goldman highlights that Westpac and the rest of the big four banks have liquidity well above requirements.

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

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• Here are the 3 most heavily traded ASX 200 shares on Tuesday

Motley Fool contributor James Mickleboro has positions in Westpac Banking. 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. 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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It certainly has been a tough month for ASX 200 banks.

The drama involving Silicon Valley Bank and Credit Suisse has shaken investor confidence and led to many investors selling their bank shares.

The good news is that every cloud has a silver lining, which on this occasion is the cheaper prices that investors can pick up bank stocks.

But given the uncertainty in the global banking sector, it’s possible that some investors may be wanting to buy only the safest of banks.

So, which big four ASX 200 bank share is the safest at the moment?

How safe are ASX 200 bank shares?

Firstly, it is worth noting that the Australian banking sector is among the most robust in the world. So, we’re going to be looking at arguably the safest of the safe when doing this.

Moving on, to get an idea of which big four bank might be the safest, we can look at metrics that banks provide.

The first is the Common Equity Tier 1 (CET1) ratio, which is essentially a measure of spare cash. It compares the core equity capital of a bank to its risk-weighted assets.

APRA notes that having adequate capital is critical to protect financial institutions’ depositors and policyholders. As such, regulators set requirements on minimum capital to ensure financial institutions can absorb unexpected losses in their business.

At present, the big four bank with the highest CET1 ratio is ANZ Group Holdings Ltd (ASX: ANZ), which last reported a ratio of 12.2%. However, it is currently in the process of acquiring the banking operations of Suncorp Group Ltd (ASX: SUN). When adjusting for that acquisition, its CET1 ratio drops to 11% on a pro forma basis.

So, Commonwealth Bank of Australia (ASX: CBA) and its CET1 ratio of 11.4% may be the true winner here.

The good news is that the other big four ASX 200 bank shares are not far behind. National Australia Bank Ltd (ASX: NAB) has a CET1 ratio of 11.3% and Westpac Banking Corp (ASX: WBC) has a CET1 ratio of 11.13%.

Importantly, all are comfortably ahead of APRA’s requirements.

Anything else?

Another couple of metrics of note are the net stable funding ratio (NSFR) and the liquidity coverage ratio (LCR). The International Bank of Settlements defines these liquidity ratios as the following:

The LCR is designed to ensure that banks hold a sufficient reserve of high-quality liquid assets (HQLA) to allow them to survive a period of significant liquidity stress lasting 30 calendar days. The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. This ratio should be equal to at least 100% on an ongoing basis.

Leading the way with these liquidity metrics is Westpac. The combination of its ratios edges out Commonwealth Bank by one percentage point.

At the last count, Westpac had an LCR of 122% and an NSFR of 139%. Whereas Commonwealth Bank has ratios of 131% and 129%, respectively.

Next in line was NAB with an LCR of 134% and an NSFR of 118%. In last place, but well above required liquidity levels is ANZ with an LCR of 125.7% and an NSFR of 119.1%.

The winner

All in all, based on the above, it would be hard to argue against CBA being the safest ASX 200 bank share.

Though, with its shares trading at a significant premium to the rest of the big four, investors may get more bang for their buck with Westpac. As covered here, Goldman Sachs believes its shares are very cheap at current levels.

The post Which ASX 200 big four bank share could be the safest to hold? appeared first on The Motley Fool Australia.

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More reading

• Want high income right now? These are the ASX dividend shares I would buy
• Boost your passive income with Westpac and this ASX 200 dividend share: experts
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• Where I would go hunting for defensive ASX 200 shares with upside

Motley Fool contributor James Mickleboro has positions in Westpac Banking. 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. 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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