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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a positive note. At the time of writing, the benchmark index is up 0.35% to 7,218.2 points.

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

Alumina Limited (ASX: AWC)

The Alumina share price is down 1% to $1.49. This decline appears to have been driven by a note out of Citi. That note reveals that its analysts have downgraded the alumina producer to a sell rating with a $1.50 price target. This follows production issues and alumina price weakness.

New Hope Corporation Limited (ASX: NHC)

The New Hope share price is down almost 2.5% to $5.07. This is despite there being no news out of the miner. However, it is worth noting that most coal miners are under pressure on Friday and are weighing on the performance of the energy sector.

Virgin Money UK (ASX: VUK)

The Virgin Money share price is down over 5% to $2.75. A disappointing first half update has been weighing on this UK bank’s shares. Virgin Money fell short of expectations due to higher costs and bad debts.

Vulcan Energy Resources Ltd (ASX: VUL)

The Vulcan Energy share price is down 16% to $5.15. Investors have been selling this lithium developer’s shares after it completed a capital raising. The company has raised 66 million euros (A$109 million) via a fully underwritten institutional placement at $5.10 per new share. This represents a 17.2% discount to its last close price. The proceeds will be used to progress Vulcan’s integrated renewable energy and lithium project execution strategy, as well as phase two project development activities.

The post Why Alumina, New Hope, Virgin Money, and Vulcan Energy shares are falling appeared first on The Motley Fool Australia.

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More reading

• Why is the Vulcan Energy share price crashing 17% today?
• ASX 300 lithium stock Vulcan Energy halted amid cap raise
• Directors are still buying the dip in New Hope shares. Should you?
• How I’d invest $1,000 in May to make easy passive income
• ASX 200 dividend stocks: Here’s a diamond in the rough yielding 18%!

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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After a wobbly start to Friday’s session, the S&P/ASX 200 Index (ASX: XJO) appears to be on track to end a three-day losing streak, helped by these mining stocks.

They’ve each rocketed to trade at their highest points in a year, with two even surpassing their all-time record highs.

Right now, the ASX 200 is up 0.34% at 7,217.4 points.

So, what’s put the wind under these mining stocks’ sails? Let’s take a look.

3 ASX 200 mining shares posting new 52-week highs on Friday

Liontown Resources Ltd (ASX: LTR)

The biggest gain of the three stocks reaching long-forgotten heights today comes from lithium miner Liontown Resources.

Its share price soared 4% earlier today to peak at $2.86 – the highest it’s ever been.

Interestingly, there’s been no news from the company since Tuesday. Then, it rebuffed reports it had been approached by a new suitor following the $2.50 takeover bid put to it by industry giant Albemarle in March.

Gold Road Resources Ltd (ASX: GOR)

Joining the lithium miner in the green are shares in gold producer Gold Road.

The company’s share price climbed 2.3% to a record high of $1.98 in afternoon trade.

Like Liontown before it, there’s been no news from the ASX 200 mining company to explain its stock’s gains.

Though, the price of gold lifted once more overnight. The yellow metal’s spot price is currently US$2,057.70 an ounce, according to CNBC. That’s just a touch off its all-time high.

The metal’s value appears to be surging in response to the ongoing US regional banking crisis, which has likely left some investors jittery about the broader economy. Such concerns have likely led many to snap up the traditional safe-haven asset.

Evolution Mining Ltd (ASX: EVN)

Finally, fellow ASX 200 gold stock Evolution Mining is also reaching long-forgotten heights today.

The company’s share price rose 2.6% to peak at $3.97 this afternoon – the highest it’s been since 12 months ago to the day.

Continuing the theme, there’s been no updates from Evolution Mining today. Its shares are likely also being driven higher by the rising price of gold.

The post 3 ASX 200 mining stocks leaping to new 52-week highs today appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs is selling off its Liontown shares. Here’s the lowdown
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• Why are ASX 200 gold shares going gangbusters today?

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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Looking to bag the boosted Macquarie Group Ltd (ASX: MQG) dividend?

Here’s what you need to know.

Macquarie dividend increased by 29%

The diversified S&P/ASX 200 Index (ASX: XJO) financial stock released its full year results for the year ended 31 March (FY23) this morning.

With net profits up 10% from FY22 to $5.18 billion, the final Macquarie dividend came in at $4.50 per share, 40% franked.

That’s up a welcome 29% from the $3.50 final dividend the company paid last year. And it represents a half year payout ratio of 60%.

It also brings the full year dividend to $7.50 per share, all 40% franked. Or some $2.9 billion returned to shareholders over the 12 months.

The full year dividends are up from a total Macquarie dividend payment of $6.22 in FY22. And it works out to  a full year FY23 payout ratio of 56%.

The company’s dividend policy remains at a 50-70% annual payout ratio.

At the current share price of $177.86, the total dividend payment equates to a yield of 4.2%. With the partial franking credits thrown in, that represents some handy passive income for shareholders.

Not a shareholder yet?

If you don’t own stock yet but are looking to score the $4.50 per share final Macquarie dividend, you’ll need to own shares at market close on Friday, 12 May.

The stock trades ex-dividend on Monday, 15 May.

Eligible investors can expect that passive income to hit their bank accounts on 4 July.

Macquarie also offers a dividend reinvestment plan (DRP) to investors who prefer that over receiving cash dividends.

The DRP election date is Wednesday 17 May 17.

Macquarie expects that all the shares allocated under its DRP will be acquired on market. However, the company noted that shares will be issued “if purchasing becomes impractical or inadvisable”.

Shareholders who are residents of Australia and New Zealand are eligible to participate in the Macquarie dividend reinvestment plan.

The post Everything you need to know about the boosted Macquarie dividend appeared first on The Motley Fool Australia.

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More reading

• Banking crisis continues: What’s up (and down) with ASX 200 bank shares today?
• Macquarie share price falls despite 10% leap in profits to $5.2 billion
• 5 things to watch on the ASX 200 on Friday
• 3 ASX 200 bank shares to go ‘long and bullish’ on right now
• Should I snap up Macquarie shares ahead of this week’s full-year results?

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 positions in and has recommended Macquarie 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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The Commonwealth Bank of Australia (ASX: CBA) share price has dropped 4% since the start of the month. So, it already looks like a rough month unless CBA can recover. The S&P/ASX 200 Index (ASX: XJO) is down as well but the 1.5% drop isn’t as bad.

Most companies report their result in February like CBA, but a few ASX bank shares have a different financial calendar.

This week we’ve heard about the results from National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ) and Macquarie Group Ltd (ASX: MQG).

While CBA is a different bank, I think comments by those institutions about the outlook can be very informative.

Worrying outlook for ASX bank shares

Yesterday, NAB’s CEO reported that the impact of higher living and interest costs on household spending and the broader economy is “becoming more evident” with consumption and overall growth in Australia starting to “soften”.

NAB said that the Australian home lending segment is facing a number of headwinds including “slowing credit growth along with heightened refinancing activity and competitive pressures.”

NAB also mentioned that the competitive pressures are increasing.

ANZ’s CEO Shayne Elliot had similar sorts of things to say about the upcoming period in comments given with the FY23 half-year result:

The next six months will be more difficult than the last. Competition in retail banking is as intense as it has ever been, both in Australia and New Zealand. We understand that sustained higher inflation and interest rates create further challenges for some households and businesses across the economy. While the number of ANZ customers in difficulty remains low, we stand ready to help in these potentially challenging times.

Macquarie is one of the banking businesses that is really ‘bringing it’ to the big banks, including CBA.

In Macquarie’s FY23 result, the banking and financial services (BFS) division saw 22% growth in the average loan portfolio and 31% growth in average deposit volumes.

Macquarie’s banking division expects growth in the loan portfolio and deposits, though it will see “higher expenses to support volume growth, technology investment, compliance and regulatory requirements”.

What does this mean for the CBA share price?

I think the CBA share price decline that we’ve seen over the past few days, and since February, reflects the uncertainty regarding lending competition.

Remember that the CBA share price has dropped over 13% since February 2023, which is quite a large fall considering there isn’t anything dramatic happening in Australia. At this stage anyway.

If arrears started increasing, this could be a problem. But, I don’t think that’s going to happen in May.

However, it seems that the net interest margin (NIM) benefits have peaked, so I wouldn’t expect a strong rebound over the next few weeks.

But, I would be cautious about more banking pain in the northern hemisphere, which could affect sentiment about banks here, even if it doesn’t have much to do with CBA shares directly.

Using the (independent) forecast on Commsec, the CBA share price is valued at 16 times FY23’s estimated earnings. So, it’s cheaper than it was but it still has a higher price/earnings (P/E) ratio than the other major ASX bank shares.  

The post What’s the outlook for the CBA share price in May? appeared first on The Motley Fool Australia.

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More reading

• Banking crisis continues: What’s up (and down) with ASX 200 bank shares today?
• Here’s how I’d aim for $200 a month in passive income using ASX 200 bank shares
• 4 reasons to buy ASX 200 banks stocks right now
• Why did the CBA share price lag the ASX 200 in April?
• Bought CBA shares in June? Here’s the dividend yield you’re earning now

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 Macquarie 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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S&P/ASX 200 Index (ASX: XJO) bank shares are putting on a mixed performance on Friday after the banking crisis taking major markets by storm continued overnight.

Stock in United States (US) regional banks PacWest Bancorp (NASDAQ: PACW) and Western Alliance Bancorporation (NYSE: WAL) plummeted 51% and 38% respectively overnight, with regulators stepping in to halt trade in the pair, the Guardian reports.

They’re suffering follows the collapse of US peers Silicon Valley Bank and Signature Bank in March. Not to mention, the Swiss government-brokered deal for UBS to acquire Credit Suisse before it crumbled.  

But that’s not all that’s going on with ASX 200 bank shares on Friday.

Stock in two majors, ANZ Group Holdings Ltd (ASX: ANZ) and Macquarie Group Ltd (ASX: MQG) moved in opposite directions after both banks released earnings earlier today.

Let’s dive into all that’s going on with ASX 200 bank shares today.

ASX 200 bank shares a mixed bag on Friday

ASX 200 bank shares are putting forward mixed performances on Friday. Take a look:

• ANZ shares are leading the majors, gaining 1.6% on the back of the bank’s first-half earnings
• Westpac Banking Corp (ASX: WBC) shares are also up, rising 0.7%
• Commonwealth Bank of Australia (ASX: CBA) stock is up 0.4%
• Meanwhile, Macquarie shares have recovered earlier falls to trade flat on the bank’s full-year earnings
• Finally, National Australia Bank Ltd (ASX: NAB) shares are plunging for a second consecutive day, falling 0.7%

For comparison, the ASX 200 is up 0.14% right now while the S&P/ASX 200 Financials Index (ASX: XFJ) has gained 0.29%.

US banking crisis continues

It’s been a big week of potentially worrying news from the US banking sector, culminating in more regulatory action overnight. Many commentators warn the continued slate of bank collapses could be an early sign of recession in the globe’s largest economy.

Earlier this week, First Republic Bank became the US’ second largest bank failure in history when regulators took control, selling the bank to JP Morgan Chase, BBC News reports.

It was a similar story as that of numerous recent collapses – including Silicon Valley Bank. Our chief investment officer Scott Phillips explained that collapse in detail at the time.

Overnight, PacWest’s share price crumbled after the bank confirmed it’s exploring strategic options, including a sale, with several partners and investors in the wings. Though, it also noted it hasn’t experienced any out-of-the-ordinary deposit flows.

Meanwhile, rumours Western Alliance was also considering a sale were emphatically shot down.

The bank said reports touting the claims were “categorically false in all respects” and it’s considering its legal options.

Despite both banks denying they’re close to joining First Republic Bank in receivership, market watchers may remain unconvinced given the shocking fall in their share prices. Find their recent performances – not including their overnight falls – below:

What would the banking crisis mean for ASX 200 shares?

Fortunately, ASX 200 bank shares have been found to be the world’s most capitalised.

Thus, it’s unlikely our market favourites will be dragged into the drama currently happening in the US.

However, as the saying goes: ‘When America sneezes, the world catches a cold’.

It’s likely that, if the US were to fall into a recession, Australia – and the ASX 200 – would be impacted to some degree.

The post Banking crisis continues: What’s up (and down) with ASX 200 bank shares today? appeared first on The Motley Fool Australia.

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More reading

• Everything you need to know about the 81 cents ANZ dividend
• ANZ shares gain as simplification strategy pays off
• Macquarie share price falls despite 10% leap in profits to $5.2 billion
• ANZ share price on watch after record result beats expectations
• Here’s how I’d aim for $200 a month in passive income using ASX 200 bank shares

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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 JPMorgan Chase. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Western Alliance Bancorporation. The Motley Fool Australia has positions in and has recommended 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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The broader market is struggling today, but not this ASX BNPL share.

During the lunch hour on Friday, the All Ordinaries Index (ASX: XAO) has recovered its morning losses and is trading just about where it ended yesterday.

And this ASX buy now, pay later (BNPL) stock is doing more than its fair share of the heavy lifting, rocketing 13% after announcing a collaboration with Visa Inc (NYSE: V).

Any guesses?

If you said Splitit Payments Ltd (ASX: SPT) go to the front of the class.

Splitit shares closed yesterday trading for 11.5 cents per share. Shares are currently swapping hands for 13 cents apiece, putting the stock up 13% at the time of writing.

Here’s what the ASX BNPL share reported this morning.

Splitit share price soars on Visa collaboration

Unlike many pay by instalment providers, Splitit allows its customers to make payments over time with their eligible credit cards.

Today, investors are bidding up the ASX BNPL share after the company reported it had signed a new two-year partnership agreement with Visa.

The agreement will see the two firms trial an enhanced instalment solution they’ve been collaborating on. This is intended to optimise consumer experience for Visa Instalments embedded in the Splitit solution.

According to the release, Visa Instalments will be integrated within Splitit’s existing API to provide a “fully embedded and universal consumer experience”. The companies expect to launch the pilot program in the second half of 2023.

Splitit CEO, Nandan Sheth said the new instalment solution will enable “acquirers and merchants to access the powerful benefits of Visa Instalments coupled with Splitit’s universal credit card acceptance in a single API integration and solution”.

Sheth added:

By providing consumers with an optimised, simplified instalment experience, merchants can enjoy improved sales conversion and increased order size. We look forward to working closely with the team at Visa to launch the solution.

The ASX BNPL share noted that future revenue from the agreement with Visa is unknown “due to the variable nature of revenues which are dependent on the value of customer purchases using Splitit’s services”.

Splitit did say that it expects the partnership “may have a material impact” on its brand and business development prospects.

How has this ASX BNPL share been performing?

Despite today’s big lift, the Splitit share price remains down 50% over the past 12 months.

The ASX BNPL share has dropped 24% so far in 2023.

The post Guess which ASX BNPL share just rocketed 13% amid a deal with Visa appeared first on The Motley Fool Australia.

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More reading

• Everything you need to know about the 81 cents ANZ dividend
• Did you buy the dip on Whitehaven shares? Here’s the dividend yield you’re earning now
• Buffers, bank blow-ups and Buffett
• 6 criteria for picking quality stocks (and 3 ASX 200 shares that meet all of them right now)
• ANZ shares gain as simplification strategy pays off

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 ANZ Group Holdings Ltd (ASX: ANZ) dividend that investors are going to receive for the first half of FY23 has just been announced with the HY23 report. The ANZ share price dropped around 2% in early reaction but picked up afterwards, rising 0.5% at $23.58.

ANZ’s half-year result is for the period ending 31 March 2023.

The ASX bank share saw profit growth as it benefited from the higher interest rate environment. ANZ reported that cash profit increased 12% to $3.8 billion.

ANZ dividend

ANZ reported that, compared to the second half of FY22, cash earnings per share (EPS) went up 7% to 127.6 cents. Statutory net profit after tax (NPAT) dropped by 1% to $3.55 billion.

This enabled the ANZ board to deliver an increase of the dividend by 9.5% to 81 cents.

The ex-dividend date for the dividend is 15 May 2023, so investors need to own shares before this date to be entitled to the dividend. The payment date is 3 July 2023.

ANZ said that its dividend payout ratio was 68.6%.

The board said that it considered the 81 cents per share payout “appropriate” for the current operating conditions.

The ASX bank share noted that its common equity tier 1 (CET1) ratio was 13.2% for the period, an increase of 89 basis points (0.89%) since September 2022. But, on a ‘pro forma basis’, including the proposed acquisition of the banking division of Suncorp Group Ltd (ASX: SUN) and adjusted for the surplus capital in the non-operating holding company, ANZ’s capital ratio was 12.1%.

What’s the outlook?

ANZ’s boss Shayne Elliot made a number of comments about the outlook. Keep in mind that ANZ’s earnings and trajectory could have a major influence on the ANZ dividend in future periods. Elliot said:

The next six months will be more difficult than the last. Competition in retail banking is as intense as it has ever been, both in Australia and New Zealand. We understand that sustained higher inflation and interest rates create further challenges for some households and businesses across the economy. While the number of ANZ customers in difficulty remains low, we stand ready to help in these potentially challenging times.

We enter the next half with a business structure that brings the benefits of geographic and product diversification. We have a robust capital position, credit loss provisions higher than any other time pre-COVID, a strong and diverse deposit base and a track-record of execution. We are seeing continued momentum and high employee engagement across all four divisions, each with a clear strategy and a funded roadmap for growth.

As the world is changing rapidly, ANZ is well placed to deploy our people and capital to help those facing challenges, but also support those looking for opportunities.

What is the ANZ dividend yield?

Based on the last two announced dividends of 81 cents per share and 74 cents per share, that’s a total of $1.55 per share. That’s a fully franked dividend yield of 6.75% and a 9.6% grossed-up dividend yield.

But, if the next ANZ dividend is increased with the result in six months then the dividend yield will be even bigger for the next 12 months.

The post Everything you need to know about the 81 cents ANZ dividend appeared first on The Motley Fool Australia.

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More reading

• ANZ shares gain as simplification strategy pays off
• ANZ share price on watch after record result beats expectations
• 5 things to watch on the ASX 200 on Friday
• 4 reasons to buy ASX 200 banks stocks right now
• 3 ASX 200 bank shares to go ‘long and bullish’ on right now

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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Whitehaven Coal Ltd (ASX: WHC) coal shares are down 4.1% in late morning trade today.

Shares in the S&P/ASX 200 Index (ASX: XJO) coal stock closed yesterday trading for $7.01. Shares are currently changing hands for $6.73 apiece.

Despite today’s retrace, Whitehaven shares remain up 33% over the past 12 months, buoyed by record thermal coal prices in 2022.

And remember, those gains don’t include the two outsized, fully franked dividend payments the ASX 200 energy share handed to investors over the full year.

Indeed, ASX investors after passive income have been well-rewarded by Whitehaven.

The company shared its soaring profits with stockholders with an all-time high final and all-time high interim dividend.

Whitehaven paid out a final dividend of 40 cents per share on 16 September. The interim dividend of 32 cents per share will have hit investors’ bank accounts on 10 March.

All told the coal miner paid out 72 cents per share in total dividends over the past 12 months.

At the current share price that works out to a trailing yield of 10.7%. Or a helpful $107 in annual passive income from a $1,000 investment, with potential tax benefits.

You won’t hear many people complaining about that kind of dividend yield.

Yet some investors will be earning a good bit more passive income from their Whitehaven shares.

We’ll look at that below.

First, please be aware that we’re discussing trailing yields here. Whitehaven’s future dividends could be higher or lower depending on numerous company-specific and broader macroeconomic factors.

Did you buy Whitehaven shares last June?

June 2022 represented an excellent time to top up on Whitehaven shares.

Admittedly I write that with 20:20 hindsight today, enabling me to cherry-pick 24 June as the monthly closing low.

But brave investors – or those who were well advised – who waded in to buy the coal stock following a lengthy slide will have been amply rewarded.

How amply?

On 24 June Whitehaven shares closed the day at $4.52 apiece,

If you’d bought the coal stock then you’d be sitting on a 49% share price gain in less than 11 months.

Even better, from a passive income perspective, you’d be earning a yield of 15.9% on those Whitehaven shares. That’s 5.2% more than investors who bought in at current prices are receiving.

It also works out to a very tidy $159 of annual dividend income, 100% franked, from your $1,000 investment.

Happy dividend investing!

The post Did you buy the dip on Whitehaven shares? Here’s the dividend yield you’re earning now appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Invested $12,000 in Whitehaven shares 5 years ago? Here’s how much passive income you’ve earned
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• No savings at 30? I’d invest $3 a day in ASX shares to target a second income of $10,824 a year
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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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Friday! It’s been a big week.

Hikes, hikes and more hikes.

This week wasn’t a good one to be a borrower.

The RBA increased rates by 0.25%, much to the chagrin of many a forecaster who had confidently predicted they’d stay on hold.

That was despite the RBA saying more hikes might be necessary.

Did I predict it? No. I don’t do predictions, because they’re not very useful, and often wrong. See above!

The US Fed also raised rates.

And… the Australian government raised the tobacco excise.

Yeah, it’s been one of those weeks!

Inflation is still too high. Central banks might have more to do (though the Fed removed a reference to future rate hikes which was in the previous statement, leading some to think it might be done).

I’ll write more about it tomorrow, but for now there’s not much to do but buckle up and hang on.

Another sort of banking hike

Meanwhile?

Meanwhile, National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ) and Macquarie Group Ltd (ASX: MQG) announced big profits this week, growing strongly, as a group.

Which will stick in the craw of many a borrower paying more for their mortgages. I dare say the banks might have wished they’d released these numbers a week earlier or a week later to avoid the direct comparison!

But, a few things: According to NAB, profits peaked during the quarter and margins had started falling by the end of March. That’s likely why shares fell 6% on the day.

Second, I’m no fan of oligopolies and their unusually strong pricing power. I’m also not a fan of the string of US banking collapses, recently.

There is absolutely a middle ground, but we should be a little careful what we wish for.

There are hundreds of banks over there. Which… is great for competition, but apparently not great for financial stability.

Badly run? Probably.

Taking silly risks? Almost certainly.

A risk to the global financial system? Yes, but hopefully not a big one.

The financial markets seem comfortable that the US and European banking regulators have this one covered. I hope that’s not a false hope.

I don’t think it is, for the record… but plenty of people might have said the same in the first couple of months of the GFC. We can never rule these things out.

Bad loans? I hope we don’t find out they were…

Speaking of which… ANZ reported today that around 30% of its borrowers are now paying interest rates that are higher than those used to approve their loans.

Which is… madness, surely?

If you’re a bank CEO, in theory job number 1 (and 2 and 3) is risk management.

If 30% of your loans are now priced higher than the level at which they were qualified… that doesn’t strike me as particularly prudent risk management.

“But everyone did it!” they say.

And this is where I turn into my mother and say “If everyone else was jumping off the Harbour Bridge, does that make it a good idea?”

Thanks Mum. That came in handy.

But maybe the bankers’ mothers might need to give them a refresher course… if it’s not too late.

A lesson, perhaps from the then-CEO of Canadian bank, TD Bank, who told CBS News in 2009 when discussing the GFC:

“We should never do things for our customers and clients that we don’t actually understand. If you wouldn’t put your mother-in-law in this, don’t put our clients in it.”

“We will make more money in this quarter than any bank in North America. So for a little Canadian bank sitting up here, yeah that feels pretty good.”

“Basically, because we didn’t do the things that blew other banks up.” 

Or Warren Buffett, talking about insurance:

“The reaction of other people when premiums are wrong is to take more risk. And our reaction when premiums are wrong is just to go play golf or something and tell somebody to call us when premiums get right again.” 

Did the banks have to make loans at those levels? No.

Would the market have crucified them for pulling back? Probably.

Does that make it right?

I know the answer. Our Mums know the answer. Our bankers – and maybe the stock market – seem not to know. Or not to care.

I hope we don’t find out in a very expensive way.

Again, I don’t think we will. But we can’t rule it out.

And I don’t know how you can have a third of your loans at rates they weren’t qualified under – and let’s assume it’s not materially different at other banks – and say you’ve been prudent.

One last one: Speaking of prudence, I’ll bet you a small amount of money that this week’s ‘profits’ will end up too high, in hindsight, having under-provided for (i.e. not putting money away to cover) future defaults.

Quick takes

Overblown: I’m incredibly frustrated by the ‘The RBA is killing us’ commentary, as if the Reserve isn’t the only adult in the room, having to make up for other failures and inaction. Rates are higher than they should be… but that’s because the Government is doing too little, not because the RBA is negligent.

Underappreciated: Groupthink. Kinda related to the above. Kinda just in general. But one observation: When, for a lark, I asked the new AI ‘bot’, Chat GPT, to tell me which ASX companies had a competitive advantage, it seemed to struggle to find one that actually didn’t. Can that be true? No, but because it uses public information, and everyone describes their company as having one, AI just tells us what it’s found. Which isn’t to say AI is useless… but there’s still plenty of opportunity to find a ‘variant perception’ if you’re looking to beat the market.

Fascinating: For all of that, though, AI’s ability to synthesise facts (subjective opinions might need some more work!) is astonishing. There’s not a day when I’m not blown away by what it can do… and how far it’s come in such a short time. Don’t bet against AI.

Where I’ve been looking: Actually, this time I’m going to talk about where I will be looking next – and that’s the annual meeting of Berkshire Hathaway (I own shares), being held this weekend, where Warren Buffett and Charlie Munger will spend the better part of six hours teaching us how to be better investors. Don’t miss it! (It’ll be livestreamed on the CNBC website, though it’s in the very early hours of Sunday, Australian time. Maybe watch the replay!)

Quote: “I’m right, and you’re smart, and sooner or later you’ll see I’m right.” – Charlie Munger

Fool on!

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More reading

• 6 criteria for picking quality stocks (and 3 ASX 200 shares that meet all of them right now)
• ANZ shares gain as simplification strategy pays off
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Motley Fool contributor Scott Phillips has positions in Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Berkshire Hathaway. 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 share market has seen plenty of volatility since the start of 2022. Senior analyst Bruce Du from IML has outlined why investors should focus on quality (S&P/ASX 200 Index (ASX: XJO) shares, particularly at times like this.

He points out that when bad weather hits a city like Sydney, we see cheap, low-quality umbrellas perform poorly and are sometimes abandoned by their owners. A similar thing happens when fear hits the share market. Investors leave low-quality companies and look for a place of shelter.

Du wrote:

But while it’s pretty easy to spot a low-quality umbrella, low-quality companies can often seem like they have exciting prospects while in reality they have little substance to them. Definitions of what makes a ‘quality’ company vary and many companies are experts at marketing their positive attributes, while hiding their shortcomings.

What makes a quality ASX 200 share?

Du believes that during times of heightened volatility and uncertainty, quality companies are “better placed to ride out the rough weather.”

There are a few different things that IML believes a quality company has, including a competitive advantage, recurring earnings, capable management and reasonable growth prospects.

He noted that high-quality management is “crucial” at a time like this because the business needs to be able to manage a changing environment and make good decisions in difficult times.

There are a couple of areas that could be particularly important for resilience during times like this – having a strong balance sheet and having pricing power/scale.

The pricing power allows companies to raise prices to offset increasing costs. Scale enables companies to have buying power to keep costs lower than competitors.

The balance sheet gives companies security and can also allow them to make the right long-term decisions even during short-term operational stress.

Which names tick all the boxes?

There were three ASX 200 shares that Du named which meet all of the criteria: Sonic Healthcare Limited (ASX: SHL), Medibank Private Limited (ASX: MPL) and Lottery Corporation Ltd (ASX: TLC).

Sonic Healthcare was described as a medical diagnostics business. It’s reportedly the number one pathology business in Australia, Germany, Switzerland and the UK, while being number three in the USA.

Du said that Sonic has competitive advantages with its technology, brand and medical specialists. It also has a strong balance sheet, with little debt, that can enable it to grow through acquisitions. It has the scale to drive harder bargains with suppliers. Finally, the analyst pointed out that the ASX 200 share has good growth prospects because diagnostic testing is a growing industry and the global population is ageing.

On Medibank, it was noted by Du that the business suffered from the cyber attack, but IML increased its holding because it scored highly on its quality metrics. The private health insurer “lost less than 1% of its policyholders due to the incident” and growing customers again.

The analyst said that the ASX 200 share has a strong brand, with “very strong levels of customer satisfaction.” Another point was that it has a leading position in a growth industry because of Australia’s growing and ageing population, which will need more medical care. There’s also an “increased importance placed on health through COVID”. The business’ leading position enables it to keep claims costs down and realise efficiency benefits, and it can also lift prices annually. Plus, it has no debt with a strong balance sheet, giving it more resilience.

On The Lottery Corporation, Du said it’s Australia’s leading lottery business which has “very high-quality, long-term and monopoly licenses”. This “effectively shut out competition”. The analyst suggests that the ASX 200 share has a loyal, engaged customer base that continues to use the products through all parts of the economic cycle, giving it “resilient, recurring revenue”.

Du also suggested that The Lottery Corporation has good growth prospects. More tickets being bought digitally these days means that less money is being lost to commission, so margins are improving. The analyst pointed out that a few years ago around 15% of customers bought tickets digitally, but this has increased to 38%. It can continue to grow margins through digital sales, while it also gives an “effective direct marketing channel to its customer base.”

The post 6 criteria for picking quality stocks (and 3 ASX 200 shares that meet all of them right now) appeared first on The Motley Fool Australia.

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More reading

• Is the Medibank share price a buy following the ASX 200 insurer’s latest update?
• Perfect balance: 2 ASX 200 shares set to surge while paying dividends
• Investing 15% of my salary could yield $500 in a monthly second income
• ‘Well placed for strong growth’: 3 ASX 200 shares that hit the spot right now
• This ASX 200 stock is ‘one of the cheapest defensives’ to buy right now

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare. 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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