The S&P/ASX 200 Index (ASX: XJO) is back from the Easter break with a bang. In afternoon trade, the benchmark index is up 1.3% to 7,312.2 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are storming higher:

Arafura Rare Earths Ltd (ASX: ARU)

The Arafura share price is up 6% to 50.8 cents. Investors have been buying this rare earths developer’s shares after it announced a binding offtake agreement with Siemens Gamesa Renewable Energy. The wind industry leader has signed an agreement for up to 400 tonnes per annum (tpa) of neodymium and praseodymium (NdPr) metal from the Nolans project.

Core Lithium Ltd (ASX: CXO)

The Core Lithium share price is up 3.5% to 90 cents. This is despite there being no news out of the lithium miner. However, it is worth noting that a number of ASX lithium shares are charging higher on Tuesday. This follows a decent night of trade for lithium stocks on Wall Street.

Mayne Pharma Group Ltd (ASX: MYX)

The Mayne Pharma share price is up 4.5% to $4.16. This follows news that the pharmaceutical company has completed the sale of its US generics portfolio. According to the release, Mayne Pharma has received US$90 million (~A$134 million) for the portfolio of commercial, pipeline, and approved non-marketed products. The agreement also includes a 10-year supply agreement for certain products and provides for up to US$15 million (~A$22 million) in contingent milestone payments.

Newcrest Mining Ltd (ASX: NCM)

The Newcrest share price is up 5% to $29.74. This morning, this gold miner revealed that it has received an improved takeover offer from North American peer Newmont Mining. Newmont has made an offer of $32.87 per share, which is up from its last offer of $27.40. This has been enough to get the Newcrest board to grant due diligence access.

The post Why Arafura, Core Lithium, Mayne Pharma, and Newcrest shares are storming higher appeared first on The Motley Fool Australia.

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More reading

• EverGreen Lithium share price rockets after IPO: everything you need to know
• Here’s why the Arafura share price is racing 11% higher
• Newcrest share price jumps on new takeover offer
• 50% fall: Are ASX 200 lithium shares a bargain buy right now?
• These are the 10 most shorted ASX shares this week

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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If you’re looking for dividends shares to buy this month, then you may want to check out the two listed below.

Here’s what you need to know about these high yield ASX dividend shares:

Healthco Healthcare and Wellness REIT (ASX: HCW)

The first ASX dividend share for passive income investors to look at is the Healthco Healthcare and Wellness REIT.

As you might expect from its name, it is a health and wellness focused real estate investment trust. The company invests in properties including hospitals, aged care, childcare, government, life sciences and research, and primary care and wellness centres.

Morgans is a fan of the company and is forecasting big dividend yields from its shares.

For example, the broker is expecting dividends per share of 7.5 cents in FY 2023 and 7.8 cents FY 2024. Based on the current Healthco Healthcare and Wellness REIT unit price of $1.35, this will mean yields of 5.5% and 5.8% for investors.

Morgans also sees plenty of upside for its shares. It currently has an add rating and $2.06 price target on them.

Mineral Resources Ltd (ASX: MIN)

Another high yield ASX dividend share that has been named as a buy is Mineral Resources.

It is a mining and mining services company with operations across energy, iron ore, and lithium.

Bell Potter is a big fan of Mineral Resources. This is due to its belief that the company is well-placed for strong earnings and dividend growth in the coming years thanks to its business transformation. It highlights that this will support “growing production volumes and improving margins.”

In respect to dividends, the broker is forecasting fully franked dividends of 373.4 cents per share in FY 2023 and then 940.9 cents per share in FY 2024. Based on the current Mineral Resources share price of $78.58, this will mean 4.8% and 12% dividend yields, respectively.

Bell Potter has a buy rating and $111.00 price target on its shares.

The post Passive income investors can get big yields from these top ASX dividend shares: experts appeared first on The Motley Fool Australia.

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More reading

• ASX 200 lithium stocks sink again following Albemarle downgrade
• Which is the best ASX 200 iron ore stock now: BHP, Fortescue, or Mineral Resources?
• Top ASX growth shares to buy in April 2023
• Why are ASX 200 lithium shares having such a miserable week?
• Brokers say these ASX dividend shares 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 recommended Elders. 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 CSL Ltd (ASX: CSL) share price lagged the S&P/ASX 200 Index in the first quarter of 2023.

Shares in the ASX 200 biotechnology company closed out 2022 trading for $287.76. When the closing bell rang on 31 March, those same shares were trading for $288.30, up 0.2%.

While that put the CSL share price in positive territory for Q1 2023, it underperformed the benchmark index, which gained 2% over the three months.

Here’s how the quarter unfolded.

What happened over the first quarter?

If you have a look at the price chart at the end of this article, you’ll see that the CSL share price enjoyed a strong run in the early weeks of 2023.

On 3 February, shares closed at $313.81, notching fresh one-year highs.

Alongside the broader rising market at the time, the biotech giant looks to have benefited from some positive broker coverage.

Morgans was among those bullish brokers, adding CSL to its best ideas list for February. Morgans has a price target for CSL shares of $312.20.

Morgan Stanley also was positive on the company’s stock, reaffirming its overweight rating with a $354 price target.

From 3 February through to 31 March, the CSL share price went the other direction though, falling 8.1% over that period.

One headwind could be that investors were pricing in news released on 3 February that GSK plc (NYSE: GSK), a rival biotech stock, had received approval from the United States Food and Drug Administration for a competing drug to treat anaemia caused by chronic kidney disease.

CSL also reported its half-year results on 14 February.

The biotech company reported a 19% year-on-year increase in total revenue for the six months to US$7.2 billion.

But profits were hit by currency headwinds and increased acquisition costs. This saw net profit after tax (NPAT) decline 8% year on year to US$1.6 billion.

The CSL share price also slipped 2.2% on 9 March. That’s the day it traded without rights to the interim dividend of $1.62, unfranked.

CSL share price snapshot

As you can see in the chart below, the CSL has enjoyed a strong start to April, with shares up 5% so far this month.

The post <strong>Why did the CSL share price lag the ASX 200 in the first quarter of 2023?</strong> appeared first on The Motley Fool Australia.

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More reading

• Build your portfolio around these ASX 200 blue chip shares: brokers
• Top defensive ASX shares to buy in April 2023
• Top brokers name 3 ASX shares to buy next week
• My top 5 ASX shares to buy and hold forever in anticipation of the bull market
• Here are the top 10 ASX 200 shares today

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 CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended GSK. 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 Lynas Rare Earths Ltd (ASX: LYC) share price is back on the horse following a dire period on the market. While the stock is up 3.38% today, trading at $6.265, it’s still more than 35% lower than its January peak.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is up 1.31% today and has gained around 5% since the start of 2023.

The Lynas share price’s Tuesday gains might have something to do with the 83% surge recorded by its peer Australian Rare Earths Ltd (ASX: AR3). Stock in the $24 million company is rocketing amid reporting on a finding said to be of “multigenerational significance”, announced last week.

Perhaps more excitingly, Australian Rare Earths said its Koppamurra project could conceptually house up to 1.4 billion tonnes of rare earth oxide – enough to put the company on the global stage, The Australian reported over the Easter long weekend.

So, while all eyes are on ASX rare earths producers and hopefuls on Tuesday, let’s delve into what the future might hold for the Lynas share price.

What’s been going wrong for this ASX 200 rare earths stock?

The Lynas share price has been driven lower by numerous disappointing announcements in 2023.

The first hit came on the renewal of Lynas Malaysia’s operating licence in February, confirming the company will no longer be allowed to import or process lanthanide concentrate from the middle of this year amid concerns about radioactive waste.

Next, it dropped its earnings for the first half of financial year 2023. It detailed a 32% jump in costs compared to an 18% increase in revenue.

Finally, the stock was pummelled once again when vehicle giant Tesla announced its next-generation powertrain would do without rare earths. That likely shook some investors’ faith in the future of rare earth producers.

What might the future hold for Lynas?

Fortunately, the future looks brighter for Lynas.

The company is appealing against the conditions put in place on its Malaysian plant. Though, if it’s unsuccessful, it will be forced to close the plant’s cracking and leaching component.

Meanwhile, it’s constructing its Kalgoorlie processing facility – housing an Aussie cracking and leaching plant. Feed on at the facility is targeted for the final quarter of this fiscal year.

It’s also continuing the development of its Mt Weld project and progressing its planned US processing facility. The project’s expansion aims to produce concentrate feedstock for 12 kilotons per annum of neodymium and praseodymium (NdPr).

How low could the Lynas share price go?

So, just how low could the Lynas share price feasibly go? Until I get my crystal ball up and running, we can only compare the stock’s valuation to that of its peers’ – and the market isn’t always so reasonable or logical.

I’ll be keeping my eye on the stock’s 52-week low of $6.02 – posted on Thursday. That’s the lowest it’s been since July 2021. At such levels, Lynas has a market capitalisation of around $5.6 billion.

Further, Lynas shares offered a price-to-book (P/E) ratio of 3.35 at its previous close. For comparison, peer Iluka Resources Limited (ASX: ILU) boasted a P/B ratio of 2.48.

Lynas’ shares would have to trade to $4.49 to meet Illuka’s P/B ratio – leaving it with a valuation of just $4.2 billion.

However, considering the company’s growth trajectory, I don’t expect its valuation to fall that far. And neither do many top brokers.

Brokers tip Lynas shares to surge up to 31%

In fact, most brokers tip the Lynas share price to gain from here.

Bell Potter, for one, has an $8.06 price target on the stock – a potential 28% upside, while Citi expects it to lift 31% to $8.20.

The post <strong>Just how low could the Lynas share price go?</strong> appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Should I buy Lynas shares while they’re under $7?
• Leading brokers name 3 ASX shares to buy today
• Why is the Lynas share price down 25% in a month?
• The Lynas share price has clocked five 52-week lows this month. Broker tips 25% upside

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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This ASX rare earths share more than doubled in early trade this morning before being put on ice.

The Australian Rare Earths Ltd (ASX: AR3) share price soared 108% this morning from 25 to 52 cents. The company’s share price then retreated to 45.8 cents, up 83%, before entering a trading halt.

For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) is climbing 2.16% today.

Let’s take a look at what is going on with this ASX rare earths share.

What’s going on?

Australian Rare Earths shares have been placed temporarily on ice pending a further announcement.

On the weekend, news hit the media that Australian Rare earths has made a discovery that could “enable an operation of Chinese scale”. The Australian noted China may also be planning to ban the export of rare earth products to the USA.

The discovery is a clay hosted rare earths resource known as the Koppamurra Project in South Australia.

As Australian Rare Earths advised last week, the JORC Mineral Resources estimate at the project has increased by 25% to 101 million tonnes at 818 parts per million (ppm) total rare earth oxide (TREO).

Further, the indicated resource has lifted 40% to 63 million tonnes at 839ppm TREO.

The company said this “outstanding result elevates Koppamurra to an ionic clay hosted rare earth resource of global and multigenerational significance”.

The “resource is open in all directions” with a 1,400 Mt exploration target.

The company noted in a presentation this clay hosted deposit is the same style that “underpins China’s massive rare earths industry”.

Commenting on the discovery, acting managing director Rick Pobjoy said:

Koppamurra is one of only very few advanced ionic clay-hosted rare earth deposits located outside of China or Myanmar. The Project it is now clearly emerging as one of both scale and quality.

The company is continuing to drill at the site and plans to provide a further resource update at the end of the third quarter.

Australian Rare Earths share price snapshot

The Australian Rare Earths share price has slid 31% in the past year. However, in the last month, it has rocketed by 103%.

This ASX rare earths share has a market capitalisation of about $43 million based on the current share price.

The post Why did this ASX rare earths share just explode 100% before entering a trading halt? appeared first on The Motley Fool Australia.

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More reading

• Why Nuix, Red 5, Silver Lake, and WAM Research shares are dropping today
• EverGreen Lithium share price rockets after IPO: everything you need to know
• Gold bug bites central banks: Is it time to buy Northern Star shares?
• 2 ASX 200 shares that could be top buys for growth
• Mortgage competition has never been hotter, so are NAB shares worth buying right now?

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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It has been a great return to action for the S&P/ASX 200 Index (ASX: XJO). In afternoon trade, the benchmark index is up 1.4% to 7,318.2 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are dropping:

Nuix Ltd (ASX: NXL)

The Nuix share price is down almost 2.5% to $1.15 despite there being no news out of the investigative analytics and intelligence software provider. Though, given that the Nuix share price is up over 80% year to date, it’s possible that some investors are taking profit and switching into other areas of the market today.

Red 5 Limited (ASX: RED)

The Red 5 share price is down almost 3% to 17.5 cents. This is despite there being no news out of the gold miner today. However, with its shares surging higher last week following a strong production update, it looks like some investors could be taking a bit of profit off the table on Tuesday.

Silver Lake Resources Ltd (ASX: SLR)

The Silver Lake share price is down 2.5% to $1.24. Once again, this may have been driven by profit taking after some strong gains by the gold miner’s shares in recent weeks. In addition, with investor sentiment improving, there may be some investors moving out of safe haven assets like gold shares and back into risk assets.

WAM Research Limited (ASX: WAX)

The WAM Research share price is down 5% to $1.26. This has been driven largely by the investment company’s shares going ex-dividend this morning for its latest dividend. Eligible shareholders can now look forward to receiving this fully franked 5 cents per share interim dividend later this month on 21 April.

The post Why Nuix, Red 5, Silver Lake, and WAM Research shares are dropping today appeared first on The Motley Fool Australia.

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• 2 ASX 200 gold shares going gangbusters (with more to come)
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Why Core Lithium, Red 5, Seek, and Viva Energy shares are storming higher
• ‘Sky-high demand’: 2 ASX 200 mining shares that could head to the moon

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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The EverGreen Lithium (ASX: EG1) share price has had a positive start to life as a listed company.

In morning trade, the ASX lithium share rocketed 20% higher than its IPO listing price to 30 cents.

What is EverGreen Lithium?

This morning, EverGreen Lithium became the latest lithium developer to list on the Australian share market.

It listed on the ASX after raising $7 million at 25 cents per new share. This gave the company a valuation of approximately $45 million.

These funds will be used to finance the exploration program for its projects in the Northern Territory and Western Australia.

Interestingly, these projects are relatively close to those owned by fellow ASX lithium shares Core Lithium Ltd (ASX: CXO) and Liontown Resources Ltd (ASX: LTR).

EverGreen owns two projects in the Northern Territory. These are its flagship Bynoe project and its Fortune project. The former is adjoining Australia’s newest lithium mine, Finniss, owned and operated by its neighbours Core Lithium.

Pleasingly, management highlights that the flagship Bynoe project exhibits many of the geological features that were key to the Finniss discovery. Through methodical exploration and learning from Core’s regional experience, the company hopes to emulate their success.

Over in Western Australia, the company has the Kenny project. It is in close proximity to Liontown’s Buldania project.

Commenting on its projects, the company said:

The Board of EverGreen believes that it has assembled a portfolio of assets with the potential to position the Company at the forefront of the battery metal revolution and a team with the skill set to optimise this tenure. Both the Board and senior management have a substantial shareholding in the Company to ensure alignment with shareholder interests.

The post EverGreen Lithium share price rockets after IPO: everything you need to know appeared first on The Motley Fool Australia.

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• 50% fall: Are ASX 200 lithium shares a bargain buy right now?
• These are the 10 most shorted ASX shares this week
• ASX 200 lithium stocks sink again following Albemarle downgrade
• Here are the top 10 ASX 200 shares today
• Why Core Lithium, Red 5, Seek, and Viva Energy shares are storming higher

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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Northern Star Resources Ltd (ASX: NST) shares are up 1.8% in late morning trade on Tuesday.

Shares in the S&P/ASX 200 Index (ASX: XJO) gold stock closed on Thursday trading for $13.18. Shares are currently swapping hands for $13.42 apiece.

While Northern Star shares trade at a premium to most of its ASX 200 peers, the gold miner retained its full-year guidance when it released its half-year results on 20 February.

That guidance includes total full-year gold sales of 1,560 to 1,680 ounces at an all in sustaining cost of $1,630 to $1,690 per ounce.

With gold currently fetching US$1,991 (AU$2,995) per ounce, that’s a healthy profit margin.

And with 2022’s voracious central bank appetite for bullion looking to continue in 2023, those margins might get even more attractive.

Why are central banks hoarding gold?

Northern Star shares are in focus following reports that The People’s Bank of China increased its gold reserves by another 18 tonnes in March. That’s the fifth consecutive month of gold purchases by the central bank.

According to Bloomberg, that brings the PBoC’s total bullion holdings to some 2,068 tonnes, having added 102 tonnes from November through February.

Central bank purchases of the classic haven asset have been spurred by the global resurgence of inflation alongside intense geopolitical uncertainty.

The World Gold Council reported that in 2022 “demand for gold was propelled by hefty central bank-buying and persistently strong retail investment”.

The Council noted:

Annual central bank demand more than doubled to 1,136t in 2022, up from 450t the year before and to a new 55-year record high. Purchases in Q4 2022 alone reached 417t, bringing the total for the second half of 2022 to more than 800t.

China’s central bank isn’t the only one continuing with the buying spree in 2023, with Turkey and Kazakhstan also adding to their gold hoards.

This trend should offer some healthy tailwinds for the gold price and Northern Star shares in the months ahead.

According to Saxo Capital Markets strategist, Jessica Amir:

In August 2023, Australian reporting season kicks off, and we think Australian gold companies’ financial results will likely show considerably higher margins (profits) and also higher dividends, in comparison to the same time last year’s results.

eToro market analyst Josh Gilbert also sounded a bullish note on gold and Northern Star shares.

“The outlook for gold topping a new high looks positive, with strong central bank and investor demand,” Gilbert said.

“The bounce back of gold prices in 2023 also improves the outlook for local miners such as Newcrest Mining Ltd (ASX: NCM) and Northern Star,” he added. “Higher gold prices mean profits should rise, likely leading to improved dividends for investors.”

Northern Star shares snapshot

As you can see in the chart below, Northern Star shares have been a major beneficiary of the rising gold price. The ASX 200 gold miner has gained 23% so far in 2023 and is up a whopping 64% over the past six months.

The post Gold bug bites central banks: Is it time to buy Northern Star shares? appeared first on The Motley Fool Australia.

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• ASX 200 gold shares are rallying. Is the yellow metal set for new all-time highs?
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• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Wednesday

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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The S&P/ASX 200 Index (ASX: XJO) shares I’m about to talk about could be two of the leading ideas for share price growth over the next two years.

The current investment environment is clouded by uncertainty over interest rates and stubbornly strong inflation.

I think ASX travel shares have the potential to keep delivering good performance as strong demand continues to play out. I’m always willing to consider names that have fallen hard — the decline could be temporary and/or overdone.

That’s why I like the look of these two ASX 200 shares.

Corporate Travel Management Ltd (ASX: CTD)

Business travel is rebounding just like leisure travel. Certainly, Corporate Travel’s latest result showed a good recovery.

The business said that in the FY23 first half, its revenue rose 79% and the underlying earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 182% to $51.3 million. Statutory net profit after tax (NPAT) was $15.7 million, up from a loss of $10 million in the prior corresponding period.

In mid-February, the business said that travel demand “remains strong with no signs of macroeconomic factors impacting the recovery”.

Across the ASX 200 share, it’s seeing benefits from open borders, operational improvements made during COVID-19, and strengthening profit margins.

In the second half of FY23, it’s expecting to make underlying EBITDA of between $109 million to $129 million, which would “provide strong momentum into FY24″. It’s continuing to win clients, retain clients, and benefit from “significant known large account wins”.

According to Commsec, the Corporate Travel Management share price is valued at just 16x FY25’s estimated earnings. I think that’s a very reasonable price considering how much profit could rise in the coming years as travel normalises.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

It has been a really difficult period for Domino’s as it loses demand after the end of COVID-19 lockdowns while also having to deal with the effects of higher inflation, which is hurting its margins.

Over the past year, Domino’s shares have fallen 36%.

But I think this makes it a very good time to look at the ASX 200 share, considering its long-term growth plans for its pizza operations in Europe and Asia.

Growth over the next five years may be slower than the last five years. But I think the ongoing scale growth of the business will help its underlying margins.

I also think Domino’s can grow its same-store sales in FY24 and beyond, which can then hopefully help the business deliver long-term profit growth — and also grow its dividend.

A slowdown of inflation could also be helpful for the business, as it doesn’t want to scare off customers by charging too much for its products.

According to Commsec, the ASX 200 share is valued at 22x FY25’s estimated earnings. FY23 may be tricky, but I think the longer term is promising because of how large the international market is.

The post 2 ASX 200 shares that could be top buys for growth appeared first on The Motley Fool Australia.

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• Will the ASX 200 hit 7,500 again in 2023?
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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 Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Corporate Travel Management and 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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The ASX bank share National Australia Bank Ltd (ASX: NAB) is facing huge amounts of competition in the mortgage space. Could this be a good time to invest in NAB shares?

NAB is one of the biggest banks and one of the biggest companies in Australia. But, the trouble is that it’s competing for the same borrowers as Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), Macquarie Group Ltd (ASX: MQG), Bendigo and Adelaide Bank Ltd (ASX: BEN) and Bank of Queensland Ltd (ASX: BOQ).

With all of these banks and the smaller non-lenders too, there’s a lot of competition in the mortgage market to win new borrowers and capture refinancing borrowers.

How strong is the competition?

The last 12 months have been an opportunity for banks to achieve much higher lending margins. This can be measured with the net interest margin (NIM). The NIM measures the lending rate compared to the cost of the funding of that money (such as savings accounts).

Bank NIMs have risen as interest rates increased – they passed on interest rates to borrowers quickly but took their time to pass on the higher interest rate to savers.

According to reporting by the Australian Financial Review, NAB’s boss Ross McEwan is letting CBA, ANZ, Westpac and Macquarie fight over household loans, while NAB can focus on the business banking side of things. He has “taken his foot off the accelerator” with the mortgages. Commenting on the business bank, McEwan said:

We can assess a risk as good or better than anybody else, which means we know what we’re going to get into and how we will deal with it if it gets into difficulty. It’s a real skill of this bank.

In our heart, we’re a business bank, and the investment continues in that business. You’ve seen our market share continue to grow and given we’re the largest player, I think that’s a pretty good measure of excellence.

According to the AFR, the CBA CEO Matt Comyn commented in February:

We believe home loan pricing across the industry is below the cost of capital.

There is a lot of refinancing going on for borrowers at the moment, so banks are competing hard on the loan rate so they don’t lose market position.

Is the NAB share price a buy?

I think NAB is doing the right thing by avoiding getting into this intense price war. We’ll have to see what this means for NAB’s market share in the medium term, but the idea for businesses is to make profit, not necessarily provide a loan as cheaply as possible.

NAB has a number of levers it can pull to make a good profit. I think the bank can outperform many of the other ASX bank shares as it navigates this tricky period.

I do think that ASX banks aren’t going to see as good conditions over the next 20 years as the last 20 years.

Any lender can provide a loan, it’s not just the major banks capable of doing that. I think margins are going to be permanently lower than they used to be last decade because of the competition. In my opinion, bad debts are going to rise – interest rates have shot higher and this is likely to cause some difficulties for some borrowers.

I think NAB can provide stronger returns than other Australia-focused banks thanks to McEwan’s leadership and the bank’s lending settings.

According to Commsec, NAB shares are valued at just 11 times FY23’s estimated earnings with a potential grossed-up dividend yield of 8.8%. I think these are very appealing metrics.

The post Mortgage competition has never been hotter, so are NAB shares worth buying right now? appeared first on The Motley Fool Australia.

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More reading

• Could right now be a great time to buy ASX 200 bank stocks for passive income?
• Buy NAB and this excellent ASX 200 dividend share for passive income: brokers
• Passive income: How much to invest to get $800 per month
• 3 Warren Buffett tips on how to invest in ASX 200 banks
• Why did the NAB share price tank more than 7% in March?

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 positions in and has recommended Bendigo And Adelaide Bank and Macquarie 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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