A curious phenomenon happens with ASX shares in June every year.

A bunch of stocks that performed badly during the financial year plunge even further.

That’s because of the fact that the income tax year in Australia ends on June 30.

Each June, many investors do a “clean out” of their portfolios and cut loose stocks that have done poorly. That means those capital losses will be put on their tax return, reducing their liabilities to the government.

So that’s terrible news for those who want to hold onto those stocks.

But it’s great news for shrewd investors who want to buy ASX shares on the cheap.

Shaw and Partners portfolio manager James Gerrish this week named four S&P/ASX 200 Index (ASX: XJO) shares that investors should consider picking up if they plummet next month.

“The ASX 200 has rallied +10.6% so far this financial year, leading to fewer candidates than on a more balanced year,” he said in Market Matters.

“But there are still plenty of stocks entrenched in the naughty corner in a year when the weak have tended to get weaker and vice versa.”

Two stocks already tempting enough to buy

Debt buyer Credit Corp Group Limited (ASX: CCP), closing Thursday’s session at $16.63, is already in the buy zone for Gerrish’s team.

“After more than halving over the last 18 months we believe the risk/reward has finally swung in favour of the buyers of Credit Corp,” he said.

“With interest rate hikes starting to bite the consumer we believe debt ledgers will become more readily available as people struggle with rising repayments across their various borrowings.”

Conditions are similarly becoming favourable for Lendlease Group (ASX: LLC), which has also plumbed to Gerrish’s desired entry point.

“Market Matters likes Lendlease around the $8 area,” he said.

“As the rental crisis continues to escalate and we are expecting significant immigration over the coming few years, the fundamental backdrop for this property and infrastructure business is starting to improve.”

Two stocks that could be tempting if June is a shocker

Casino operator Star Entertainment Group Ltd (ASX: SGR) has seen its share price more than halve over the past 12 months as it battled a series of well-publicised governance scandals.

With the company facing potentially massive fines from authorities, Star Entertainment shares are already trading near 52-week lows.

But Gerrish could be tempted if it keeps hitting new troughs.

“The risk profile is wide for Star but the value is returning for this unpopular business depending on the potential NSW casino duties with very real risks that NSW Labor may restructure the business model,” he said.

“We believe Star Entertainment will trade between $1.10 and $1.50 through 2023 providing solid opportunities for active/aggressive investors.”

Gerrish’s fourth pick, which is the least preferred, is Bank of Queensland Ltd (ASX: BOQ).

“We see further downside risks for BoQ despite the valuation being close to extreme multiples, but it is starting to represent value into its current decline,” he said.

“We believe it’s too early to catch this falling knife… [But] Market Matters may consider BOQ under $5.”

Bank of Queensland shares closed Thursday at $5.61.

The post 4 ASX 200 shares to buy if they plunge from June tax-loss selling appeared first on The Motley Fool Australia.

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• With interest rates rising, why have ASX 200 bank shares been pummelled in 2023?
• Warren Buffett is dumping bank stocks. Should you?
• Bank of Queensland is offering the highest savings interest rate of any ASX bank. What might this mean for shareholders?
• Here are the top 10 ASX 200 shares today
• Brokers name 3 ASX shares to buy now

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 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 mining share Tietto Minerals Ltd (ASX: TIE) finished the session yesterday at 54 cents, down 1.8% for the day and down 18% over the past month.

This gives the junior gold miner a market capitalisation of $598.15 million.

Katana Asset Management says the ASX mining share is ‘simply too cheap’ at this price level.

Let’s find out a bit more about Tietto Minerals.

Junior ASX mining share offers big value

Tietto owns West Africa’s newest producing gold mine, the Abujar Gold Project on the Ivory Coast.

Tietto is in the final stages of ramping up to full production after achieving its first ore production in December 2022 and its first gold pour in January this year.

The miner expects to reach or exceed full nameplate production by next month.

Broker impressed by low-cost, long-life mine

Tietto Minerals shares are down almost 30% in the year to date and down 18% over the past month.

Katana’s Australian equity fund portfolio manager Romano Sala Tenna told the Australian Financial Review (AFR) that this recent pullback has provided a buying opportunity.

Sala Tenna said:

[Tietto Minerals] has just finished construction and has commenced production at its mine in the safe jurisdiction of Cote d’Ivoire.

The recent pullback in its share price values the business at under $600 million.

This is simply too cheap for a low-cost, long-life company that will soon be producing at around 200,000 ounces per annum.

What’s the latest news from Tietto?

Tietto recently upgraded the Abujar mineral resource estimate by 10% to 3.83 Moz.

The company is now revising its Life of Mine production plan for delivery in Q3 CY23.

Tietto Managing Director Dr Caigen Wang said Abujar is “an extensive gold system of which less than 10% has been explored to date”.

He expects the revised Life of Mine plan to show “significant improvements.”

In its March quarter report, Tietto said it expects to produce 25,000 to 30,000 ounces of gold in Q2 2023.

From there, it forecasts gold production of between 105,000 to 120,000 ounces from 1 July to 31 December at an all-in sustaining cost (AISC) of US$875 to US$975 per ounce.

Its full-year forecast is 134,000 ounces to 154,000 ounces.

A ‘healthy financial position’

Like all ASX gold shares, Tietto is benefitting from high gold prices.

The spot gold price has recently been testing its previous record high of US$2,069.40 set in 2020.

Tietto said its gold sales in the March quarter totalled 7,586 ounces at an average price of US$1,980 per ounce.

In a statement, the company said:

Tietto ended its first partial quarter of Abujar operations in a healthy financial position with $6.96m
cash on hand and $5.7m in bullion on hand and is expecting strong cash generation from operating
activities in Q2 2023.

Perfect timing for this ASX mining share

It seems that full production at Abujar is coming online at just the right time.

Top broker Goldman Sachs is forecasting the average gold price to go higher over coming years.

Goldman is expecting an average price per ounce of US$2,008 in Q2 FY23, US$2,078 per ounce in Q3 FY23, and US$2,108 per ounce in Q4 FY23.

It gets better in 2024 with the Goldman team tipping an annual average of US$2,175 per ounce.

They predict an average gold price of US$2,087 per ounce in 2025 and US$2,000 per ounce in 2026.

The post The ASX mining share that’s ‘simply too cheap’! appeared first on The Motley Fool Australia.

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More reading

• Why are young ASX investors so in love with Pilbara Minerals shares?
• 4 ASX 200 shares to buy if they plunge from June tax-loss selling
• Own Webjet shares? Here’s what to look for in next week’s full-year results
• Buy these excellent ASX 50 shares now: broker
• Is it possible Appen shares have finally bottomed?

Motley Fool contributor Bronwyn Allen 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 Goldman Sachs Group. 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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Owners of Webjet Limited (ASX: WEB) shares might be on the edge of their seats next week as the travel company gears up to release its full-year earnings.

The online travel agency will drop its results for financial year 2023 on Wednesday morning, and investors could be in for a treat.

Webjet shares finished the day trading for $7.39 apiece yesterday, 0.82% higher than their previous close.

For comparison, the S&P/ASX 200 Index (ASX: XJO) closed up 0.52%.

Let’s dive into what those invested in Webjet shares might expect to find in next week’s earnings release.

What can fans of Webjet shares expect from the company next week?

Looking back to FY22

Before we look forwards, let’s glance backwards. All the way back to this time last year when Webjet released its financial year 2022 earnings.

Then, the ASX 200 travel giant posted $1.6 billion of total transaction value (TTV), $138 million of revenue, and a $15 million earnings before interest, tax, depreciation, and amortisation (EBITDA) loss.

While it revealed an $85 million statutory loss for the period, it also noted it had returned to profit in the second half of last financial year.

That was reiterated in November when Webjet announced it had realised a $32 million profit for the first half – sending its share price soaring 10%.

Broker forecasts Webjet to beat FY23 guidance

So, with all that considered, it’s reasonable to expect the company could post its first full-year profit since financial year 2019 next week.

In November, it forecast its WebBeds business to exceed pre-pandemic profitability over the full year, with second-half EBITDA to come in at least $10 million above pre-pandemic levels.

Meanwhile, profitability for its business-to-consumer segment – housing its online travel agency and GoSee offering – is expected to be in line with the first half.

Broker Goldman Sachs, however, expects the company’s actual earnings to come in higher.

It tips Webjet to post around $338 million of revenue – representing a potential 145% improvement – and $124 million of EBITDA – a potential $139 million increase.

However, consensus is that the company won’t return to dividend just yet. CommSec figures suggest it could pass that milestone in financial year 2024.

Webjet share price snapshot

The Webjet share price has outperformed in recent months.

The stock has gained 21% since the start of 2023. It has also risen 28% since this time last year.

For comparison, the ASX 200 has gained 4% year to date and 1% over the last 12 months.

The post Own Webjet shares? Here’s what to look for in next week’s full-year results appeared first on The Motley Fool Australia.

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More reading

• Buy these excellent ASX 50 shares now: broker
• Is it possible Appen shares have finally bottomed?
• Buy these ASX shares with big dividend yields: Goldman Sachs
• 3 magnificent ASX dividend shares that could turn $5k into $50,000
• 5 things to watch on the ASX 200 on Friday

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 positions in and has recommended Goldman Sachs Group. 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 team at Morgans has a best ideas list that it updates every month.

To be included on this list, an ASX share has to offer the highest risk-adjusted returns over a 12-month timeframe and be supported by a higher-than-average level of confidence.

A couple of shares from the super exclusive ASX 50 index that have made the list this month are named below. Here’s why the broker is bullish on them:

CSL Limited (ASX: CSL)

This biotherapeutics company could be an ASX 50 share to buy according to Morgans.

The broker believes that CSL’s outlook is very positive now after COVID headwinds dissipated and tailwinds emerged. In addition, the broker feels that its shares are trading at a level that could be classed as “good value” historically. It explains:

A key portfolio holding and key sector pick, we believe CSL is poised to break-out this year, a COVID exit trade, offering double-digit recovery in earnings growth as plasma collections increase, new products get approved and influenza vaccine uptake increases around ongoing concerns about respiratory viruses, with shares offering good value trading around its long-term forward multiple of ~30x.

Morgans has an add rating and $337.92 price target on CSL’s shares. This compares to the latest CSL share price of $302.82.

Seek Ltd (ASX: SEK)

Another ASX 50 share that Morgans rates highly is job listings giant Seek.

Its analysts are positive on the company due to their belief that it will benefit from a number of tailwinds in the near term. These tailwinds are expected to lead to increased reliance on the company’s products and services. It explains:

Of the classifieds players, we continue to see SEEK as the one with the most relative upside, a view that’s based on the sustained listings growth we’ve seen over the period. The tailwinds that have driven elevated job ads (~210k currently, broadly flat on the robust pcp) and strong FY22 result appear to still remain in place, i.e. subdued migration, candidate scarcity and the drive for greater employee flexibility. With businesses looking to grow headcount in the coming months and job mobility at historically high levels according to the RBA, we see these favourable operating conditions driving increased reliance on SEEK’s products.

Morgans has an add and $28.40 price target on Seek’s shares. This compares favourably to the current Seek share price of $23.85.

The post Buy these excellent ASX 50 shares now: broker appeared first on The Motley Fool Australia.

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More reading

• 4 ASX companies that own CSL shares (and lots of them!)
• Top brokers name 3 ASX shares to buy next week
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• Here are the top 10 ASX 200 shares today
• Top brokers name 3 ASX shares to buy today

Motley Fool contributor James Mickleboro has positions in CSL and Seek. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended Seek. 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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Appen Ltd (ASX: APX) shares finished the session on Thursday up 6.49% to $2.46 per share.

They’ve had a 14% bump over the past five trading days, although, in the middle of that, they dropped like a stone to a seven-year low of $1.91 after coming out of a trading halt on Wednesday.

Okay, that’s gonna take some explaining. We’ll get to that in a minute.

Bigger picture, the thoroughly bloodied and beaten-up ASX tech share is actually in the green for the year to date, up 4.24% despite all its woes.

While it’s still in tumultuous territory, could the bleeding be over for this former market darling?

What’s going on with Appen shares this week?

Appen shareholders could seek some solace from Zip shares investors these days.

Both stocks are in the doghouse, down more than 90% from their peak prices reached just a few years ago.

But both of them have zoomed higher this week, prompting speculation that the worst may be over.

Hmmmm. Let’s review the week’s Appenings.

On Tuesday, Appen requested a trading halt and announced a $60 million capital raising.

The offer was $1.85 per new share, which is one heck of a discount.

It’s almost 25% lower than yesterday’s closing price and more than 40% lower than where Appen shares were before last Wednesday’s calamitous trading update.

(That update sent the Appen share price spiralling 28% in one day from $3.19 to $2.29.)

Also on Tuesday, the company released an investor presentation to sell the capital raise to institutional and retail investors, and to explain its strategy for a refresh.

The company said the funds would pay for one-off costs associated with its cost reduction program, provide balance sheet flexibility, and general working capital to support its return to profitability.

Before the market open on Wednesday, Appen informed the ASX that it had completed the $21 million institutional component of its equity raising.

Appen’s CEO Armughan Ahmad said:

Appen is delighted with the successful outcome of the Institutional Component of the Equity Raising and the support received from both existing and new institutional shareholders.

We look forward to executing on the vision we have communicated to the market and delivering results for our shareholders.

Less than an hour later, the tech share resumed trading and flatlined at the open, dropping 17% to $1.91.

That’s the lowest price Appen shares have traded at since their pre-WAAAX club days in 2016.

Appen shares hit a new low but bounce back hard

Interestingly, the stock rebounded over the day and finished the session on Wednesday at $2.34.

You got that? Appen shares dropped 17% at the open… then finished the day 0.4% higher than Tuesday’s halted share price.

Talk about a rollercoaster ride.

Anyway, with the $21 million institutional part done, the $38 million retail entitlement offer will commence on 23 May and close on 6 June.

Approximately 32.2 million new Appen shares will be issued under the equity raising. That represents about 26% of Appen’s existing shares on issue.

That’s a fair bit of dilution for existing shareholders to stomach.

What do the brokers think?

As reported in The Australian, top broker Bell Potter has responded to the news of the capital raising by increasing its rating on Appen shares to hold.

But its 12-month price target of $2.20 is lower than where Appen shares are currently trading.

So that’s not very inspiring for investors.

Last week, before the capital raise was announced, my Fool colleague James reported on how a few other brokers are thinking in relation to Appen shares.

The Morgan Stanley team had retained their underweight rating and cut the price target on Appen shares to $2.

The broker appeared uncertain about how Appen will be able to generate revenue growth while also cutting costs.

Macquarie analysts had downgraded Appen shares to underperform and cut their price target by more than half to $1.18.

This was largely due to the broker expecting Appen to perform poorly for a while.

Based on Macquarie’s valuation alone, it looks like this week’s seven-year low of $1.91 may not be the bottom for Appen shares.

The post Is it possible Appen shares have finally bottomed? appeared first on The Motley Fool Australia.

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• Why Appen, Best & Less, Incitec Pivot, and Weebit Nano shares are falling
• Deja vu! Why is the Appen share price crashing 17% today?
• Why is the Appen share price in a trading halt?
• Macquarie forecasts Appen shares to crash a further 47%
• Broker gives its verdict on the Appen share price crash

Motley Fool contributor Bronwyn Allen has positions in Appen. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen. 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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Are you looking for big dividend yields? Then look no further!

Two shares that have been rated as buys and tipped to provide investors with big dividend yields by Goldman Sachs are listed below.

Here’s what its analysts are saying about these dividend shares right now:

BHP Group Ltd (ASX: BHP)

If you don’t mind investing in the mining sector, then BHP could be a top option to consider.

That’s because Goldman Sachs is expecting this mining giant to provide investors with some very big dividend yields in the near future.

For example, the broker is forecasting fully franked dividends of US$2.05 (A$3.09) per share in FY 2023 and US$1.63 (A$2.46) per share in FY 2024. Based on the current BHP share price of $44.24, this will mean dividend yields of 7% and 5.6%, respectively.

Goldman also sees potential for BHP shares to rise from current levels. It currently has a buy rating and $49.90 price target on its shares.

Universal Store Holdings Ltd (ASX: UNI)

Another ASX share that has been tipped to provide a big dividend yield is Universal Store. It is a youth fashion retailer behind brands including Perfect Stranger, Thrills, and (of course) Universal Store.

Goldman Sachs is very positive on the retailer. It advised that this is due to “UNI’s strong medium term growth drivers in the form of 1) significant store roll out opportunity, with the youth fashion market under-penetrated in our view, and 2) compelling margin improvement opportunities from retailing private label apparel.”

The broker is expecting this to underpin fully franked dividends per share of 24 cents in FY 2023 and 31 cents in FY 2024. Based on the current Universal Store share price of $4.40, this will mean dividend yields of 5.45% and 7%, respectively.

As with BHP, Goldman sees plenty of room for Universal Store’s shares to rise from where they currently trade. The broker has an add rating and $7.45 price target on them.

The post Buy these ASX shares with big dividend yields: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• Why is the BHP share price outpeforming the ASX 200 today?
• How does the Fortescue dividend stack up against BHP and Rio?
• I’d invest $3,000 each in these ASX dividend shares for almost $1,000 in annual income
• Why the BHP dividend forecast has caught my attention!
• Goldman Sachs says these ASX dividend stocks with big yields are buys

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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There is an impression among many investors that big riches can only be achieved with ASX growth shares.

But that can’t be further from the truth. There are multiple paths to the promised land.

The fact is that strong returns are possible with ASX dividend shares.

Let’s take a look at how you could turn $5,000 into $50,000 this way.

Compounding is like magic

The way to grow your portfolio using dividend stocks is to utilise the magic of compounding.

So rather than treat dividends as income, reinvest it immediately. This can be done manually, or automatically using a dividend reinvestment plan (DRP).

The great advantages of a DRP are that you don’t need to worry about execution, the share purchase price could be cheaper than market value, and there is no brokerage fee.

This means that an initial $5,000 outlay could balloon into $50,000 after 27 years if a 9% yield is continually reinvested.

Not bad. 

But in reality, $50,000 could be reached much faster.

There are three ways the returns could be supercharged:

• Franking: Australian investors are lucky enough to have this tax benefit if you pick stocks for certain companies that have already paid company tax.
• Capital growth: If you pick the right dividend stocks, the share price itself may rise to provide extra returns.
• Regular contributions: You don’t have to stop at $5,000! If you add a small amount to the portfolio every once in a while, it makes a huge difference to the end result.

After franking and capital growth, let’s assume you can bump up the annual returns from 9% to 12%. Then let’s say you chip in $100 each month.

That way you’ll turn $5,000 into $50,000 in just over 12 years.

Amazing. That’s the power of compounding.

3 ASX dividend shares that could land you a 10-bagger portfolio

So which are the best dividend stocks to buy now to achieve such returns?

Remember, that blindly picking the ASX shares with the highest dividends is asking for trouble.

One must balance decent yield with positive business prospects. You don’t want the share price to shrink over time, nor do you want the dividends to collapse because the company is in financial trouble.

Here are three suggestions that fit the bill: McMillan Shakespeare Ltd (ASX: MMS), Australian Clinical Labs Limited (ASX: ACL), and Ampol Ltd (ASX: ALD).

McMillan Shakespeare and Ampol pay out a dividend yield of 8.64% and 8.95% respectively. Australian Clinical Labs is handing out a stunning 13.3%. They are all 100% franked.

Professional investors like the business prospects of all three companies. 

According to CMC Markets, four of five analysts currently covering Australian Clinical Labs rate the stock as a strong buy. Five of seven reckon McMillan Shakespeare is a buy, while 11 out of 12 say that about Ampol.

No analyst surveyed on CMC Markets rated any of the trio as sells.

The post 3 magnificent ASX dividend shares that could turn $5k into $50,000 appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• 12 ASX dividend shares with yields over 10%. Are they too good to be true?
• Here are the top 10 ASX 200 shares today
• Which ASX All Ords healthcare share has a 20% dividend yield?
• 11 ASX shares to buy with 4 on-trend qualities right now

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 McMillan Shakespeare. 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 Thursday, the S&P/ASX 200 Index (ASX: XJO) was on form again and pushed higher. The benchmark index rose 0.5% to 7,236.8 points.

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

ASX 200 expected to rise

The Australian share market looks set to end the week in a positive fashion following a strong night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 14 points or 0.2% higher this morning. In the United States, the Dow Jones was up 0.35%, the S&P 500 rose 0.95%, and the NASDAQ jumped 1.5%.

Xero shares rated as a buy

The Xero Limited (ASX: XRO) share price was on fire on Thursday following the release of the cloud accounting platform provider’s full-year results. The good news is that Goldman Sachs sees potential for its shares to keep rising. This morning, the broker has responded to the result by reiterating its buy rating with an improved price target of $130.00.

Oil prices fall

ASX 200 energy shares Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a poor finish to the week after oil prices fell overnight. According to Bloomberg, the WTI crude oil price is down 1.1% to US$72.10 a barrel and the Brent crude oil price is down 1.2% to US$76.05 a barrel. A stronger US dollar weighed on prices.

Gold price tumbles

Gold shares Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could have a tough session after the gold price tumbled overnight. According to CNBC, the spot gold price is down 1.25% to US$1,960.2 an ounce. Hawkish US Fed bets put pressure on gold.

Aristocrat still a buy

Aristocrat Leisure Limited (ASX: ALL) shares fell yesterday following the release of the gaming technology company’s half-year results. Goldman Sachs sees this as a buying opportunity and has reiterated its conviction buy rating with an improved price target of $46.70. It said: “While the market reaction to this update was weak, which we believe to be largely driven by Pixel United, the update offers incremental support to our Buy thesis.”

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

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More reading

• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• 12 ASX exchange-traded funds (ETFs) smashing new 52-week highs today
• Here’s the latest on the US debt ceiling and what it means for ASX 200 shares
• Why Nufarm, Serko, Temple & Webster, and Xero shares are charging higher

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended 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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Many of the ASX 200 bank shares have taken a fall in 2023.

Isn’t that a bit strange, given interest rates have been rising at their fastest pace on record?

The banks make most of their money from lending, so aren’t rising interest rates a positive?

Let’s investigate this together.

ASX 200 bank shares lose up to 17% in 2023

First, let’s check out the state of play for the most well-known ASX 200 bank shares.

Over the year to date, here’s how these bank stocks have performed:

• The Bank of Queensland Ltd (ASX: BOQ) share price has dropped 17%
• The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has declined 10%
• The National Australia Bank Ltd (ASX: NAB) share price has tumbled 10%
• The Westpac Banking Corp (ASX: WBC) share price has fallen 8%
• The Commonwealth Bank of Australia (ASX: CBA) share price has dipped 3.2%.

Only a couple of ASX 200 bank shares are in the green. They are:

• The Macquarie Group Ltd (ASX: MQG) share price has risen 5.4%
• The ANZ Group Holdings Ltd (ASX: ANZ) share price has ascended 2.7%.

The positives of rising interest rates for ASX 200 bank shares

On the banks’ balance sheets, we see the positive impact of rising interest rates in a number of ways.

One of them is improved net interest margins (NIMs) across the board for all of these companies.

The NIM is the amount of money the banks earn from the interest they are paid by borrowers, less the interest they pay to their savings account holders.

Here’s where the NIMs are today, in descending order:

• Commonwealth Bank NIM of 2.1% for 1H FY23, up 0.23% on 2H FY22
• Westpac NIM of 1.96% for 1H FY23, up 0.05% on 2H FY22
• Bendigo and Adelaide Bank NIM of 1.88% for 1H FY23, up 0.19% on 2H FY22
• Bank of Queensland NIM of 1.79% for 1H FY23, up 0.04% on 2H FY22
• National Australia Bank NIM of 1.77% for 1H FY23, up 0.14% on 2H FY22
• ANZ Bank NIM of 1.75% for 1H FY23, up 0.07% on 2H FY22.

The negatives of rising interest rates for ASX 200 bank shares

There are actually a bunch of negatives, and a few of them are as follows.

Higher interest rates mean the banks have to pay more to deposit holders. As we all know, many banks have been slow to apply higher interest rates to savings accounts but quick to raise rates on loans.

They do this to maximise their profits by raising their NIM.

The highest savings rate available at the moment is 5.3% with the Bank of Queensland. Meantime, most homeowners are paying home loan rates in the 6% to 7% bracket now.

Secondly, the banks are highly leveraged to the Australian property market, and higher interest rates tend to lower sales volumes (meaning fewer new loans) and lower sale prices (due to less buyer demand).

This intensifies competition between the banks for a smaller pool of new loans, prompting them to fork out money on expensive incentives to attract new business, such as cashbacks.

Lastly, rising interest rates tend to boost mortgage stress, which is defined as people spending more than 30% of their income on housing costs. This tends to raise the prevalence of loan arrears and defaults.

So, while the ASX 200 banks are certainly happy to be charging more on their loans, they have to be careful to get the balance right.

The fallout of US bank collapses

Rumblings in the global banking sector are making everyone a bit nervous these days. Some commentators are saying this could be a prelude to a recession in the United States.

The silver lining is that softened prices for ASX 200 bank shares may present a buying opportunity.

Buying the dip is so much more fun when stocks are down for sentiment reasons only.

As my colleague Bernd recently wrote, Australian banks are among the world’s most capitalised, and therefore, they’re considered a pretty safe bet for ASX investors.

Are ASX 200 bank shares a buy?

There are mixed reviews among the brokers at the moment.

Their opinions boil down to their assessment of how each bank is operating, as well as their share price valuations, rather than the universal positive of higher interest rates for ASX 200 bank shares generally.

Let’s do a quick canvas of recent broker notes regarding the big four banks, as well as Macquarie.

CBA shares

The CBA share price closed on Thursday at $98.00, up 0.9%.

Citi has a sell rating on CBA shares on valuation grounds. Its 12-month share price target is $80.

UBS is neutral on Commonwealth Bank with a $100 price target.

Goldman Sachs maintains a sell rating with an $87.78 target on the CBA share price.

NAB shares

The NAB share price is currently $26.40, up 0.8% on Thursday.

Goldman Sachs nominates NAB as its favourite among ASX 200 bank shares today.

This is mainly due to NAB’s comparatively stronger commercial business. The other banks have higher residential property exposure.

The team at Goldman sees “volume momentum over the next 12 months as favouring commercial volumes over housing volumes and we believe NAB provides the best exposure to this thematic”.

Goldman has a buy rating on NAB shares and a $30.69 price target.

For extra perspective, two of our Fool scribblers went head-to-head in a Bull vs. Bear article on NAB shares recently.

Westpac shares

The current Westpac share price is $20.96, up 0.19% on Thursday.

Westpac is the preferred option of the ASX 200 bank shares for the Morgans team.

They have an add rating on Westpac shares with a 12-month price target of $24.22.

Goldman is also a Westapc fan with a conviction buy rating on the shares and a $24.67 price target.

As we revealed recently, Westpac is the preferred ASX 200 bank share in millionaire portfolios.

ANZ shares

The ANZ share price is currently $23.64, up 0.25% on Thursday.

Citi reckons ANZ is the best of the big four ASX 200 bank shares to buy now.

As my Fool colleague James reports, this is largely due to its institutional business, which Citi believes is a key differentiator.

The broker said:

We see ANZ’s unique capabilities as set to deliver relative outperformance in the current market conditions. ANZ is our preferred Major Bank exposure.

Citi currently has a buy rating and a $26.50 price target on its shares.

UBS is buy-rated on ANZ shares with a $25 price target.

Goldman Sachs has a neutral rating and a $26.17 target on the ANZ share price.

Macquarie shares

The Macquarie share price closed at $173.59 on Thursday, up 0.84%.

Morgans has an add rating and a 12-month price target of $201.80 on Macquarie shares.

Morgans comments:

MQG is a quality franchise, exposed to structural growth areas, and the company performed exceptionally well in a more difficult FY23 environment. With >10% share price upside to our price target, we continue to maintain our ADD recommendation.

Goldman has a neutral rating on Macquarie Bank shares with a $192.01 price target.

Shaw and Partners portfolio manager James Gerrish says Macquarie shares are a buy because the business offers more earnings diversification than other ASX 200 bank shares.

Gerrish says:

Ultimately, it’s the reason we like the stock. Different divisions perform differently at different times and that creates a nice level of diversification in their earnings.

As we reported recently, Macquarie has the highest profit margin of the ASX 200 bank shares.

Foolish takeaway

Higher interest rates may be a tailwind, on balance, for ASX 200 bank shares, but this doesn’t guarantee that all of them will do well in this climate.

In a clear demonstration of this, Warren Buffett recently sold some bank stocks but kept others.

So, it’s best to remain discerning when choosing which ASX 200 bank shares to hold or invest in today.

For extra reading, we compared the dividend yield and share price growth of the big four over five years.

The post With interest rates rising, why have ASX 200 bank shares been pummelled in 2023? appeared first on The Motley Fool Australia.

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More reading

• Invested $6,000 in NAB shares in November? Here’s how much passive income you’ve already banked
• Why ANZ shares are Citi’s top banking pick
• An ASX dividend giant I’d buy over CBA shares
• Investing in ANZ shares? Here’s what’s happening with the bank’s $3.5 billion Suncorp acquisition
• These ASX dividend stocks have been tipped to offer big yields

Motley Fool contributor Bronwyn Allen has positions in ANZ Group, Commonwealth Bank Of Australia, Macquarie Group, and Westpac Banking Corporation. 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 and Macquarie Group. 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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Are you looking for retirement portfolio options? If you are, then you may want to look at the quality ASX shares listed below.

Here’s why these shares could be top options for retirees:

Charter Hall Long WALE REIT (ASX: CLW)

The first ASX share to consider for a retirement portfolio is the Charter Hall Long Wale REIT.

As you might have guessed from its name, this property company invests in high quality real estate assets that have long weighted average lease expiries (WALEs). These properties are leased mainly to corporate and government tenants and had a WALE of 12 years at the last count.

This provides great visibility on its future earnings and arguably makes it a low risk option in the property space.

Citi is positive on the company and is expecting big dividend yields in the coming years. It is forecasting dividends per share of 28 cents in FY 2023 and 29 cents in FY 2024. Based on the current Charter Hall Long Wale REIT unit price of $4.33, this will mean yields of 6.45% and 6.7%, respectively.

The broker has a buy rating and $5.00 price target on its shares.

Transurban Group (ASX: TCL)

Another ASX share that could be a good option for a retirement portfolio is this leading toll road operator. Transurban owns a high-quality portfolio of roads in Australia and North America. In addition, it has a significant project pipeline that could support its growth in the future.

After being a ghost town during the pandemic, the company’s roads have bounced back strongly and traffic volumes are now booming again. They even hit record levels recently. Combined with its positive exposure to inflation, Transurban has been tipped to grow at a solid rate in the coming years.

UBS is positive on the company. It currently has a buy rating and $15.45 price target on its shares.

In addition, the broker is forecasting dividends per share of 57 cents in FY 2023 and then 61 cents in FY 2024. Based on the current Transurban share price of $14.74, this will mean yields of 3.9% and 4.2%, respectively.

The post Analysts name 2 excellent ASX shares for a retirement portfolio appeared first on The Motley Fool Australia.

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More reading

• Analysts name 2 strong ASX 200 dividend shares to buy
• Here are 2 growing ASX dividend shares for income investors to buy: analysts
• 5 ASX shares I’d buy for a US recession
• Top defensive ASX shares to buy in May 2023
• Citi rates these ASX dividend shares as buys

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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