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The Sezzle Inc (ASX: SZL) share price has risen by around 35% during February so far.

Indeed, many businesses within the buy now, pay later industry have been performing strongly including Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and Humm Group Ltd (ASX: HUM).

The company has made a few different announcements over the last couple of months, including its 2020 fourth quarter update.

What did Sezzle announce recently?

In the fourth quarter of 2020, Sezzle said that underlying merchant sales (UMS) grew by 40.6% quarter on quarter, or 205.4% year on year, to A$419.8 million despite all the impacts of COVID-19.

Sezzle’s merchant fees grew by 32.6% to A$22.5 million quarter on quarter, it represented year on year growth of 195.6%. However, the merchant fees as a percentage of UMS was 5.4%, which was down 32 basis points quarter on quarter and down 18 basis points year on year.

The company also continues to add a large number of consumers and merchants. Active consumers went up 143.9% year on year to 2.23 million and active merchants rose 166.6% year on year to 26,690.

The final statistic that Sezzle reported was that the active consumer repeat usage improved again to 89.8%, up 75 basis points quarter on quarter and up 608 basis points year on year.

The next announcement that Sezzle made was the signing of a US$250 million receivables warehouse facility with Goldman Sachs and Bastion to support the expansion of the company’s business in the US and Canada.

Sezzle’s new 28-month facility helps the company’s balance sheet, replaces its US$100 million receivables facility and extends Sezzle’s funding facility well into 2023. Its existing facility’s maturity was May 2022. This new facility will also lower the company’s cost of funding, which will provide a positive effect on Sezzle’s net transaction margin over time.

The final announcement was that Sezzle signed an agreement with Discover that will allow Sezzle to work with selected merchants on the Discover Global Network in offering consumers additional payment options. Discover is a digital banking and payments services company. The Discover Global Network has more than 48 million merchant acceptance locations and two million ATM and cash access locations around the world.

Is the Sezzle share price a buy?

Sezzle shares are currently rated as a buy by broker Ord Minnett.

The broker thinks that Sezzle has been a leader in the ASX buy now, pay later industry for a while. Sezzle has been benefiting from good network effects as well as continuing strong uptake from customers.

Ord Minnett rates the Sezzle share price as a buy. However, the target share price is $11 for Sezzle, which means the current upside is in low single digits in the broker’s view.

More reading

• Sezzle (ASX:SZL) share price tumbles despite new agreement
• Why is the Splitit (ASX:SPT) share price underperforming Afterpay and Zip?
• Why the Sezzle (ASX:SZL) share price is charging 7% higher today
• Zip (ASX:Z1P) share price is soaring 13%, smashing another record high
• These ASX shares are helping this fund manager smash the market

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Humm Group Limited and Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Up 35% in February, can the Sezzle (ASX:SZL) share price go higher? appeared first on The Motley Fool Australia.

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Are you looking for some top ASX dividend shares to add to your income portfolio? 

Then you might want to take a look at the dividend shares listed below. Here’s what you need to know about them:

National Storage REIT (ASX: NSR)

The first ASX dividend share to look at is National Storage. From over 190 locations across the ANZ region, it tailors self-storage solutions to residential and commercial customers.

While 190 locations may sound like a large number, management still sees plenty of room for growth through acquisitions and developments. So much so, it recently revealed that since the end of FY 2020, National Storage has completed eight acquisitions for $139 million and is working to complete a number of development projects.

It also reiterated that it expects to report underlying earnings per share of 7.7 cents to 8.3 cents in FY 2021 and plans to payout 90% to 100% to shareholders.

Based on the middle of both guidance ranges and the current National Storage share price, this represents a 4.2% yield.

Rural Funds Group (ASX: RFF)

Another ASX dividend share to look at is Rural Funds. It is the owner of a diverse portfolio of high quality Australian agricultural assets that are leased to highly experienced operators.

Last week it released its half year results and revealed adjusted funds from operations (AFFO) per unit of 6.6 cents. This means it is on track to achieve its full year forecast.

It also revealed that its ultra-long weighted average lease expiry (WALE) metric had increased further. It was up from 10.9 years to 11.1 years over the last six months.

In addition to this, management reaffirmed its FY 2021 distribution guidance of 11.28 cents per share and unveiled its FY 2022 guidance of 11.73 cents per share.

Based on the current Rural Funds share price, this will mean yields of 4.8% and 5%, respectively.

More reading

• 3 ASX shares that keep growing the dividend every year
• Did you miss the Rural Funds (ASX:RFF) 94% profit growth in HY21?
• 2 reliable ASX dividend shares to buy for your income portfolio
• 2 quality ASX dividend shares to buy and hold
• 3 top ASX dividend shares to buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Is the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price a buy right now?

Some brokers have had their say on the matter including Credit Suisse and Morgan Stanley after the big four ASX bank released an update.

ANZ told investors how the bank performed the first three months of its FY21:

ANZ’s first quarter performance

The major bank said that it generated statutory profit after tax of $1.62 billion for the first quarter. It also said that cash profit from continuing operations of $1.81 billion was up 54% on the average of the last two quarters of FY20.

However, when looking at the continuing cash profit before credit impairments, large items and tax, it was down slightly.

ANZ said that the total provision result in the three months to 31 December 2020 was a net release of $150 million. This comprised an individually assessed provision (IP) charge of $23 million and a collective provision (CP) release of $173 million. The release of CP is equivalent to around 10% of the $1.7 billion set aside during FY20.

The major bank said that the CP release is prudent when balancing the improvement in the economic outlook at the end of the December quarter with the level of ongoing uncertainty.

ANZ also said that its Australian loan book still had 15,000 active house loans still being deferred due to COVID-19, being represented by around $6 billion. This has fallen from 96,000 loans worth $33 billion. Of the 81,000 housing loan accounts that have completed their deferrals, 98% have returned to repayment, 1% has been restructured and 1% has been transferred to hardship.

The big four ASX bank said that the APRA level 2 common equity tier 1 (CET1) capital ratio had risen to 11.7%, up from 11.3% at September 2020 and 10.8% at March 2020.

ANZ CEO Shayne Elliott said:

ANZ is well positioned heading into the remainder of 2021 with good momentum in our core activities. The work done to simplify and de-risk the business over the past five years set us up well and we have the capital, liquidity and operational capacity to continue to support our customers and the broader economic through what remains a volatile period.

What do brokers think of the ANZ share price?

The brokers are pretty unanimous that ANZ shares look like a buy.

Credit Suisse said that ANZ’s cash earnings were a lot better than expected, with a stronger net interest margin (NIM) and a good balance sheet. A highlight was the increase in the ANZ market share in home loans in Australia.

Based on this result, ANZ decided to increase its expectations of ANZ’s profit by 40% in this financial year, as well as a mid single digit increase of underlying profit.

ANZ is the big four bank that the broker likes the most. It has a share price target for ANZ of $29.50.

Morgan Stanley was also impressed by the ANZ update, with areas like revenue and capital better than expected. Morgan Stanley thinks that the outlook is good for ANZ with its control of costs, lower loan bad debts and a good trend for the margin.

More reading

• 2 of the best ASX 200 results from last week
• Why the Ainsworth (ASX:AGI) share price surged 15% today
• Brokers name 3 ASX shares to buy right now
• Why the ANZ (ASX:ANZ) share price is storming higher today
• ASX 200 up 0.2%: ANZ and CSL impress, Fortescue declares huge interim dividend

Motley Fool contributor Tristan Harrison 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 Bruce Jackson.

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On Friday the S&P/ASX 200 Index (ASX: XJO) finished the week with a very disappointing decline. The benchmark index fell 1.35% to 6,793.8 points.

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

ASX futures pointing lower

The Australian share market looks set to start the week in the red. According to the latest SPI futures, the ASX 200 is expected to open the week 11 points or 0.15% lower this morning. This follows a mixed end to the week on Wall Street on Friday night. That saw the Dow Jones trade flat, the S&P 500 fall 0.2%, and the Nasdaq index up slightly.

Oil prices sink lower

Energy producers Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could start the week in the red after oil prices sank lower on Friday night. According to Bloomberg, the WTI crude oil price fell 2.1% to US$59.24 a barrel and the Brent crude oil price fell 1.6% to US$62.91 a barrel. This led to oil prices having their first negative week in three weeks.

NIB half year results

The NIB Holdings Limited (ASX: NHF) share price will be on watch today when it hands in its half year results. According to a note out of Morgans, its analysts expect the private health insurer to report an underlying profit of $82 million and cash earnings of $85 million. This is expected to lead to NIB declaring a 10 cents per share fully franked interim dividend.

Gold price pushes higher

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) will be on watch after the gold price edged higher on Friday. According to CNBC, the spot gold price rose 0.15% to US$1777.40 an ounce. The gold price dropped to a seven-month low last week amid rising treasury yields.

Costa results

This morning investors will be watching the Costa Group Holdings Ltd (ASX: CGC) share price when it hands in its FY 2020 results. Analysts at Morgans believe there is upside risk to its net profit after tax forecast of $52.2 million and the market consensus of $48.1 million. It notes that retail demand and pricing has been favourable across much of its domestic business.

More reading

• 5 things to watch on the ASX 200 next week
• 2 ASX 200 shares to buy for growth
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• ASX 200 sinks 1.3%, Cochlear soars, TWE sours

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended NIB Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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When looking at growth shares, I like to focus on ones that have long runways for growth. This is because these companies have the potential to generate strong long term returns, allowing investors to benefit from compounding.

Three ASX growth shares which have been tipped for big things in the future are listed below. Here’s why they are highly rated:

Kogan.com Ltd (ASX: KGN)

This ecommerce company could be worth a look due to the continued rise in online shopping. In addition to this, its expansion into potentially lucrative verticals, the growing popularity of Kogan Marketplace, and recent acquisitions should support its growth in the coming years.

Although Kogan’s shares have surged higher over the last 12 months, analysts at Credit Suisse believe they can still go higher. The broker currently has an outperform rating and $21.08 price target on its shares.

Pushpay Holdings Group Ltd (ASX: PPH)

Another highly rated ASX growth share to consider is Pushpay. It is leading donor management and community engagement platform provider with a focus on the faith sector. Pushpay has been growing at a rapid rate in FY 2021 and expects to achieve full year operating earnings of US$56 million and US$60 million. This will be up a massive 123% to 139% year on year.

Positively, this is still scratching at the surface of its addressable market in the United States, which gives it a long runway for growth over the 2020s. Management is aiming to win a 50% share of the medium to large church market. This slice is estimated to be worth US$1 billion in revenue per annum at present.

Analysts at Goldman Sachs are positive on the company. They have a conviction buy rating and $2.59 price target on its shares.

Xero Limited (ASX: XRO)

A final ASX growth share to look at is this cloud-based business and accounting software provider. Despite the pandemic’s impact on small businesses, Xero has continued to perform strongly in FY 2021. This has gone down well with analysts at Goldman Sachs. They were impressed with its performance in the first half and believe it can still grow materially over the next decade and beyond.

It currently has a buy rating and $157.00 price target on its shares. Goldman believes Xero can achieve a 2030 subscriber footprint of 7.4 million and generate NZ$3.4 billion in annual revenue.

But even better, the broker doesn’t expect its growth to stop there. Its analysts see opportunities for Xero to monetise its app ecosystem and drive multi-decade strong growth.

More reading

• Got cash to invest? Here are 2 ASX shares to buy
• Why the Openpay (ASX:OPY) share price is surging higher today
• One year on and 50% up, the All Technology Index is booming
• 3 outstanding ASX growth shares to buy today
• 2 exciting ASX tech shares to buy

The post 3 explosive ASX growth shares to buy next week appeared first on The Motley Fool Australia.

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Do you have some cash to invest? There are some ASX shares that may be worth looking into at the moment.

Share prices are always changing, so a business can become good value if it falls back a bit.

However, businesses that are falling can be called ‘falling knives’ because you don’t know how far they’re going to fall. Some businesses have growing profits but – at the moment – declining share prices, like these two:

Kogan.com Ltd (ASX: KGN)

The Kogan.com share price has fallen by around 25% since 25 January 2021.

If you don’t know much about Kogan.com, it’s an e-commerce business where a large number of different products and services are sold such as TVs, computers, phones, devices, clothing, furniture and cars. Services that are sold include mobile plans, insurance and energy.

The ASX share has seen elevated levels of demand ever since COVID-19 came along. Kogan.com recently gave a trading update for the first six months of FY21.

It said that gross sales grew by more than 96% and gross profit increased by more than 120%. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 140% and adjusted EBITDA grew by 175%.

It ended the period with $78.9 million of cash. It also had 3 million active customers for the Kogan.com business and another 719,000 active customers for the Mighty Ape business. Mighty Ape is a New Zealand e-commerce business that Kogan.com recently acquired. 

Kogan.com founder and CEO Ruslan Kogan spoke of the focus of the business to keep delivering growth:

We are investing into building strong customer relationships by expanding our logistics capability, our marketing reach and our systems and infrastructure – giving us the foundation to continue delighting customers as the business further scales.

Looking at the current Kogan.com share price, it’s valued at 22x FY23’s estimated earnings according to Commsec.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a funds management business that has around $100 billion of funds under management (FUM). The Magellan share price has fallen by 10% since 15 February 2021. 

It has a few different investment strategies, with international equities and infrastructure equities being the main two. Magellan also has an Australian funds management division as well.

Morgans is one of the brokers that likes Magellan at the moment, with the fund manager beating the broker’s expectations with its FY21 half-year result. The average FUM growth was essentially in line with the management fee increase.

The ASX share’s near-term prospects are expected to be dictated by the direction of the market as well as its ability to generate performance fees.

However, Morgans is attracted to Magellan’s new product launches and good balance sheet, plus the principal investments, for long-term growth. Two of those new investments within the parent Magellan company include FinClear and Barrenjoey, the investment bank which has been attracting a lot of talent to the new outfit.

Morgans is expecting Magellan to generate $2.28 of earnings per share in FY21, which means it’s valued at 20x FY21’s estimated earnings.

The broker has a share price target of $58.26 for Magellan.

More reading

• Why the Openpay (ASX:OPY) share price is surging higher today
• One year on and 50% up, the All Technology Index is booming
• 3 outstanding ASX growth shares to buy today
• 2 of the best ASX growth shares to buy now
• Why the Kogan (ASX:KGN) share price is charging higher today

Tristan Harrison owns shares of Magellan Financial Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

Afterpay Ltd (ASX: APT)

According to a note out of Morgan Stanley, its analysts have retained their overweight rating and lifted their price target on this payments company’s shares to $170.10. The broker notes that buy now pay later (BNPL) providers have been growing very strongly despite increasing competition. The broker believes this bodes well for Afterpay’s future growth, especially given its industry-leading repeat usage. In addition to this, it sees opportunities for Afterpay’s growth to accelerate in the future as its builds out its offering. The Afterpay share price ended the week at $151.92.

Westpac Banking Corp (ASX: WBC)

Analysts at Morgans have retained their add rating and lifted their price target on this banking giant’s shares to $27.50. According to the note, Westpac delivered a first quarter result well ahead of the broker’s expectations. Morgans was particularly pleased with the bank’s net interest margin, which has improved since the second half of FY 2020. In light of this strong start to the financial year, the broker has lifted its earnings estimates and price target accordingly. The Westpac share price last traded at $24.09.

Whispir Ltd (ASX: WSP)

A note out of Ord Minnett reveals that its analysts have upgraded this cloud-based communications platform provider’s shares to a buy rating with a $4.53 price target. This follows the release of a first half result which was in line with its expectations. Whispir reported a 29.2% increase in its Annualised Recurring Revenue (ARR) to $47.4 million for the half. Ord Minnett believes that Whispir is well-placed to continue its strong growth over the medium term. The Whispir share price ended the week at $4.20.

More reading

• Is the Westpac (ASX:WBC) share price a buy?
• 5 things to watch on the ASX 200 next week
• Here’s why the Afterpay (ASX:APT) share price is storming 6% higher today
• Why Cochlear, Goodman, Lovisa, & Whispir shares are surging higher
• Why the Whispir (ASX:WSP) share price is surging 10% higher today

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Whispir Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Whispir Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are a number of smaller businesses on the ASX that aren’t well known but may be able to make good returns for investors.

It is usually easier for a business to double from $500 million to $1 billion than it is to go from $5 billion to $10 billion because of the difficulty of doubling bigger and bigger numbers.

That’s why these ASX growth shares could be worth thinking about:

City Chic Collective Ltd (ASX: CCX)

This business is a global retailer of plus-size clothes, footwear and accessories for women. Not only does City Chic have a large network of retail stores across Australia and New Zealand, but it also has wholesale agreements in the northern hemisphere and a website in the US.

City Chic is liked by brokers such as Macquarie Group Ltd (ASX: MQG) and Morgan Stanley.

Macquarie thinks that City Chic is going to report that it’s had a solid period of operating over the last few months. Macquarie thinks that it has good growth potential over the long term.

Morgan Stanley thinks that domestic sales in ANZ may have been solid in the first half when looking at other ASX retail shares. Other acquisitions could be on the cards with its healthy balance sheet.

The ASX growth share recently acquired Evans in the UK. City Chic plans to turn it into an online-only offering, with lower costs.

Audinate Group Ltd (ASX: AD8)

Audinate is a business that owns the Dante platform which replaces traditional analogue audio cables by transmitting synchronised audio signals across large distances to multiple locations at once using just a ethernet cable.

It’s used in the professional live sound, commercial installation, broadcast, public address and recording industries.

COVID-19 has impacted some of the industries that Audinate helps, but it is recovering. In the first half of FY21, Audinate said that it had generated US$11.1 million of revenue – this was in-line with the first half of FY20. It represented an increase of 19.3% from the revenue made in the second half of FY20.

Audinate also announced in the same update that it has been able to attract and establish an experienced video development team of 11 employees in Cambridge, in the UK. Audinate is looking to develop the next generation of Dante audio and video software implementations. It wants to make Dante video the technology of choice. This will help increase the company’s total addressable market.

Bailador Technology Investments Ltd (ASX: BTI)

Bailador describes itself as a technology expansion capital fund. In other words, it invests in private technology businesses.

It’s invested in a few different businesses right now including Instaclustr, Stackla and Straker Translations Ltd (ASX: STG).

Bailador says that its portfolio of companies are well capitalised with no liquidity concerns. It has a portfolio of 10 investments which have a gross margin of more than 75%. Bailador has disclosed 86% of the company revenue is recurring. Excluding travel, its portfolio is generating revenue growth of 25%.

It recently reported its FY21 half-year result which showed a net profit of $13.1 million and the pre-tax net tangible assets (NTA) per share increased by 12.3% to $1.39.

Bailador expects 2021 to be a significant year for profitable realisations.

More reading

• 2 of the best ASX tech shares to buy this week
• Bailador Technology Investments (ASX:BTI) share price is pushing higher
• 3 ASX shares rated as strong buys by brokers
• 2 ASX shares rated as strong buys by brokers
• 2 ASX shares to own according to fund managers

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO and Macquarie Group Limited. The Motley Fool Australia has recommended Bailador Technology Investments Limited and Straker Translations. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Appen Ltd (ASX: APX)

According to a note out of Macquarie, its analysts have downgraded this artificial intelligence services provider’s shares to an underperform rating and cut the price target on them to $19.00. The broker made the move amid concerns that Appen could be losing market share due to increased competition. It suspects this could lead to consensus downgrades once its challenging outlook is understood better by the market. The Appen share price ended the week at $21.60.

Bendigo and Adelaide Bank Ltd (ASX: BEN)

Analysts at Morgan Stanley have retained their underweight rating but lifted the price target on this regional bank’s shares to $9.90. This follows the release of a half year result which went down well with the broker. And while this has led to the broker upgrading its earnings estimates for the coming years, it isn’t enough for a change of rating. It continues to see more value in other bank shares. The Bendigo and Adelaide Bank share price last traded at $10.03.

Wesfarmers Ltd (ASX: WES)

A note out of Citi reveals that its analysts have retained their sell rating but lifted the price target on this conglomerate’s shares to $45.00. According to the note, the broker was pleased with Wesfarmers’ strong half year result. It appears confident there will be more of the same in the second half due to favourable trading conditions. However, it feels that this is already factored into its shares and sees no reason to change its recommendation at this point. The broker also has concerns that Wesfarmers could be struggling to find suitable acquisitions. The Wesfarmers share price ended the week at $54.01.

More reading

• 3 reasons the Wesfarmers (ASX:WES) share price could be in the buy zone
• Wesfarmers (ASX:WES) share price on watch after broker upgrade
• ASX 200 mixed, CSL reports 44% profit growth, TWE soars
• Top brokers name 3 ASX shares to sell today
• Wesfarmers (ASX:WES) share price tumbles despite strong half year profit growth

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Could the Westpac Banking Corp (ASX: WBC) share price be worth a buy?

Some brokers have had their say after having a look at the numbers reported by the big four ASX bank for the first quarter of FY21.

So let’s have a look at some of those highlights first before getting to the broker thoughts.

Westpac’s FY21 first quarter highlights

The major ASX bank reported an unaudited statutory net profit of $1.7 billion, which compared to the second half quarterly average statutory profit of $550 million.

It also reported unaudited cash earnings of $1.97 billion, which was up on the second half of FY20 quarterly average of $808 million. Cash earnings were up 54% when excluding notable items.

The bank said that core earnings were up 28%, or up 3% excluding notable items.

Part of the profit growth came about from an impairment benefit of $501 million from improved credit quality, the stronger economic outcomes and a better economic outlook after COVID-19 impacts. Consumer delinquencies of more than 90 days were lower over the quarter, including Australia mortgage delinquencies over 90 days being 16 basis points lower to 146 basis points.

The number of loans that are in deferral continue to decline. It had $11 billion of Australian mortgage deferrals at 31 January 2021, with a significant roll-off expected in February and March.

Westpac’s net interest margin of 2.06% was up 3 basis points compared to the second half of FY20.

Discussing the outlook for Westpac, the CEO Peter King said:

We are also beginning to improve momentum in mortgages and while the book was little changed over the half, we have processed a significant increase in applications. Low interest rates, rising house prices, new construction, and high consumer confidence all points to continued recovery in home lending activity in 2021.

What do brokers think?

Broker Morgans was particularly impressed by the update, as the cash profit was 23% better than the broker was expecting. It was mostly better because of the impairment benefit with the provision release.

Another important point that the broker liked was the NIM of 2.06%. The NIM is an important profitability metric for banks like Westpac.

For Morgans, Westpac is the best big bank and thinks it’s a better pick than Commonwealth Bank of Australia (ASX: CBA).

Morgans is expecting Westpac to pay a dividend of $1.32 per share for FY21, which translates to a grossed-up dividend yield of 7.8%. It has a share price target of $27.50 for Westpac.

However, broker Ord Minnett wasn’t that impressed. It thinks that it will need to show more of a recovery if Westpac wants to continue to do better than other big banks.

Ord Minnett did say that Westpac is on track to consider extra capital returns with how strong the bank’s balance sheet is now with a CET1 ratio of 11.9%. Ord Minnett has a share price target of $24.50 for Westpac shares. The broker thinks that the bank will only pay a grossed-up dividend yield of 7.1% for FY21.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Westpac (ASX:WBC) share price jumps after Q1 54% profit growth
• ASX 200 down 0.5%: Domino’s delivers, Westpac impresses, Coles sinks
• Why Domino’s, EML Payments, Redbubble, & Westpac shares are storming higher
• Westpac (ASX:WBC) share price on watch as it delivers $2bn quarterly profit result

Motley Fool contributor Tristan Harrison 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 Bruce Jackson.

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