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The Nuix Ltd (ASX: NXL) share price has come under significant pressure on Wednesday.

At the time of writing, the investigative analytics and intelligence software provider’s shares are down 16% to $1.07.

Why is the Nuix share price crashing?

Investors have been hitting the sell button on Wednesday after the company’s former CEO, Edward Sheehy, appealed a recent court decision.

This relates to Sheehy’s claims that he validly exercised options in January 2020 that would have entitled him to be issued with approximately 22.6 million shares. And with the former CEO claiming that he would have sold these shares long before Nuix shares had collapsed, he was seeking an award of damages of up to $169 million plus interest.

A month ago, the Nuix share price rocketed higher after the court dismissed his claims.

However, Nuix has now been notified that Sheehy has lodged a notice of appeal in respect of certain aspects of that decision.

The release notes that Sheehy contends that the primary Judge was incorrect in concluding that he was precluded from raising the matters in his claims by reason of the doctrine of Anshun estoppel and that share options held by Mr Sheehy could not be exercised following Nuix’s IPO in December 2020.

What’s next?

It is worth noting that Sheehy is not appealing the primary Judge’s findings that Nuix had not engaged in any oppressive or unconscionable conduct.

In addition, Nuix notes that:

Mr Sheehy has also not appealed the primary judge’s finding, that: even if he was to be successful in his claims that he was entitled to 22,663,650 shares in respect of his 453,273 options; and that he was entitled to exercise those options following the Nuix IPO.

As a result, his maximum potential damages claim would be approximately $61 million plus interest rather than the $169 million plus interest he originally claimed.

Nevertheless, Nuix continues to reject Sheehy’s claims and will defend the appeal.

The post Nuix share price dives 16% on new legal battle with former CEO appeared first on The Motley Fool Australia.

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More reading

• Why Inghams, Kelsian, Nuix, and Perenti shares are racing higher
• Nuix share price surges 6% on return to profit
• Earnings preview: Here are the ASX shares reporting on Monday
• Dash for trash fades as earnings cliff looms for ASX shares, with the market shooting first and asking questions later
• Why Appen, Lendlease, Nuix, and Star shares are sinking today

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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It’s been a day of red ink so far this Wednesday on the S&P/ASX 200 Index (ASX: XJO). At the time of writing, the ASX 200 has slipped by a meaningful 0.88% this session thus far to 7,300 points. But that’s nothing compared to the apparent woes of the Woodside Energy Group Ltd (ASX: WDS) share price.

ASX 200 energy share Woodside closed at $37.62 a share yesterday. But the company opened at just $35.20 a share this morning and has fallen even further to $34.77 at present.

So what’s going on with Woodside? Why are we witnessing the Woodside share price wilt by a whopping 7.6% this Wednesday?

Well, there has been some news out of Woodside today. The company announced this morning that directors Dr Sarah Ryan and Dr Christopher Haynes are both standing down from Woodside’s board of directors.

This will be effective from Woodside’s annual general meeting on 28 April next month. The company has announced that Arnaud Breuillac is to join the board in their place, with Angela Minas also nominated for membership.

But it seems unlikely that these changes at the top are what’s weighing on Woodside shares.

No, today’s share price falls can largely be attributed to Woodside trading ex-dividend.

Woodside share price falls after going ex-dividend

Last month, during its full-year results for FY2023, Woodside reported some pleasing metrics. These included a 142% rise in revenues and a 223% spike in net profits. This enabled the company to announce a record final dividend of US$1.44 per share. This is scheduled to hit investors’ bank accounts on 5 April.

However, eligibility for this monster payout has just closed. Woodside shares have traded ex-dividend for the company’s final dividend payment this morning. That means that anyone who buys Woodside shares from today onwards will not be receiving this latest dividend payment.

As such, the value of this dividend has left the Woodside share price – making the shares intrinsically less valuable. That’s why we are seeing a big drop in the Woodside share price this Wednesday, as is typical when a share goes ex-dividend.

It should be mentioned that Woodside would probably be having a tough day anyway, even if it wasn’t going ex-dividend. Most of Woodside’s peers in the ASX 200 energy sector are falling in value this session.

Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) are both down by more than 1% so far. And Karoon Energy Ltd (ASX: KAR) is down 2.5%.

Today’s falls put the Woodside share price down by 1.74% in 2023 to date:

At the current Woodside share price, this ASX 200 energy share has a dividend yield of 10.85%.

The post Why is the Woodside share price wilting 7% on Wednesday? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 bank shares slump could continue: Morgan Stanley
• 5 things to watch on the ASX 200 on Wednesday
• Why did the Woodside CEO just sell off over $200,000 worth of shares?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Owners of this ASX 200 share are soon going to receive a bigger dividend

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX dividend shares are a popular investment choice for Aussies who want to generate investment income. But, there’s an argument to say that it could harm returns for some businesses over the long term.

There are plenty of high-quality businesses on the ASX that are among the best at what they do, such as Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Telstra Group Ltd (ASX: TLS).

Investors may expect a high level of dividend income from these businesses each year. But for plenty of companies, there could be better uses of money.

Growth spending is better?

When a business makes a profit, there’s a variety of different things that the management could do with that money.

One of the most popular things for them to do in Australia is to pay a dividend. Investors like to receive a ‘real’ return. Institutional investors may want to get that cash out of the business – boosting their short-term returns.

But, that ASX dividend (yield) may only be worth a few percent in investors’ hands. It could be worth less than 1%.

Some, or all, of that money, could be re-invested back into the business and generate a much better return.

A business could open a new, advanced, manufacturing plant. It could use the cash to open a few new stores in a new city/country. It could hire more sales people, or spend a bit more on developing the next product or service.

Some businesses can generate enormous returns on money invested in the business. This can be measured in a few different ways such as the return on equity (ROE) or return on capital (ROC). Those figures are good indicators of how much money the company is earning on the cash that has been invested in the business by the business.

For example, Wesfarmers Ltd‘s (ASX: WES) ROE in the first half of FY23 was 32.8%. It could make sense for Wesfarmers to retain more of its cash and achieve a high internal return, which would hopefully translate to a boost to profit, the share price and dividends down the line.

Berkshire Hathaway is a great example of what a great business (and investor) can do with retained profit. Warren Buffett’s business has achieved a compound annual gain of 19.8% per annum between 1965 to 2022 – that’s a total return of 3,787,464%.

The US giant has a policy of not paying a dividend because the cash is worth more to investors staying in the business than as a dividend. If it had paid a dividend, Buffett would have had a smaller money pile to compound, so it would have grown into a smaller amount over the years, even if he achieved the same investment returns in percentage terms.

Tax can also have an impact on the effectiveness of paying dividends. When a company makes a profit, it generally pays tax on that net profit. Not only has the company paid tax, but then the individual typically has to pay tax on the dividend too, particularly if they’re in a high tax rate. The shareholder’s wealth, on paper, can be reduced by receiving the dividend.

ASX dividends can make sense

There are some situations where it does make sense to pay dividends.

For starters, in Australia, companies generate franking credits – a refundable tax offset. It can make sense for the company to unlock the franking credits that it generates. For shareholders with a low (or zero) tax rate, the franking credits give investors an after-tax boost to the cash return.

Plus, a business may not always have a good opportunity to invest that money. That’s why I think it’s worthwhile investing in businesses that have lots of growth options. But, eventually, a business may not have attractive growth options. In that case, it’d be better to give out the cash than invest it badly or make a terrible acquisition.

For example, Wesfarmers shouldn’t keep expanding its Bunnings network until there’s a warehouse on every street corner.

I think businesses need to make a careful choice about what’s best for the shareholder. But, I do believe it does make sense for some Aussie companies to unlock some franking credits for investors each year, particularly if that’s what shareholders want.

The post Too much of a good thing? When ASX dividends could hurt your overall returns appeared first on The Motley Fool Australia.

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More reading

• Why is the Woodside share price wilting 7% on Wednesday?
• Sayona Mining share price dips despite first lithium production
• Lynas share price rebounds on $200m Japanese Government investment
• Mesoblast share price rockets 23% on FDA news
• 10 ASX 200 stocks trading ex-dividend tomorrow

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 Berkshire Hathaway. The Motley Fool Australia has positions in and has recommended Telstra Group and Wesfarmers. 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 Sayona Mining Ltd (ASX: SYA) share price is down 3.3% on Wednesday morning, currently trading for 23.7 cents per share.

It’s not just the Sayona Mining share price under pressure today.

In fact, all of the S&P/ASX 200 Index (ASX: XJO) lithium stocks are well into the red at the time of writing.

Which could be why Sayona Mining is sliding, despite reporting its first lithium production.

What did the ASX 200 lithium stock report?

The Sayona Mining share price is in the red even though the miner announced the production of its first spodumene concentrate at its flagship North American Lithium (NAL) operation.

Some 70 tonnes of lithium concentrate were produced at NAL, located in Quebec, Canada.

The emerging lithium producer labelled it “another milestone in NAL’s restart”.

It said that commissioning is proceeding on schedule and within budget. The first saleable concentrate is expected to be produced soon.

Commenting on the progress that’s yet to lift the Sayona Mining share price, managing director Brett Lynch said:

This is another great achievement for the team at NAL. I extend my thanks to everyone concerned for progressing the NAL restart on time and on budget – something few others have achieved in recent times amid escalating cost and supply chain pressures.

“These are exciting times with the first saleable lithium concentrate to be produced soon, marking the next step in Sayona’s evolution towards becoming a leading hard rock lithium producer,” Lynch added.

According to Sayona Mining, its NAL project will be the most significant source of hard rock lithium production in North America.

The company expects to ship its first spodumene concentrate from NAL in July 2023. It’s targeting four shipments in the first half of fiscal 2024.

Sayona Mining also updated the market on its drilling program alongside joint venture partner Jourdan Resources.

Plans are in place for more than 50,000 metres of drilling in 2023 at NAL and Jourdan’s adjacent Vallée Lithium Project.

Sayona Mining share price snapshot

Despite today’s dip, the Sayona Mining share price remains up an impressive 81% over the past 12 months.

Though, as you can see on the chart below, it hasn’t exactly been a smooth ride.

The post Sayona Mining share price dips despite first lithium production appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why InvoCare, Pentanet, Sayona Mining, and Weebit Nano shares are storming higher
• Sayona Mining share price charges higher following $55m cap raise
• Here are the 10 most shorted ASX shares this week
• Why has the Sayona Mining share price just been halted?

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 Lynas Rare Earths Ltd (ASX: LYC) share price is up 1.15% to $7.455 in early trading on Wednesday.

The share price bounce follows news from the rare earths miner posted after the market close yesterday.

The Japanese Government is giving Lynas $200 million in exchange for priority supply until 2038.

In a statement, Lynas said the new deal will “further strengthen the Lynas balance sheet and support funding of capital projects designed to meet accelerating global demand for Rare Earth materials”.

What news has the Lynas share price rebounding today?

Lynas hit a new 52-week low of $7.26 yesterday amid various negative news over the past fortnight.

The big one is the recent revelation from Telsa Inc (NASDAQ: TSLA) that its next-gen electric vehicle (EV) motor won’t use any rare earths.

On top of that, Lynas has problems with its new Malaysian licence, and last week it reported a 4% decline in profit in 1H FY23 and a 32% increase in costs. All kinda depressing for investors.

So, this new $200 million investment is welcome news today for investors in Lynas shares.

Here are the details.

The new agreements are between Lynas and Japan Australia Rare Earths B.V. (JARE).

JARE is a special-purpose company established by the Japanese Government administrative institution, the Japan Organization for Metals and Energy Security (JOGMEC), and Sojitz Corp (TYO: 2768).

Under the new agreements, JARE will give Lynas $200 million and forego the US$11.5 million in interest that Lynas owed but deferred in 2016 under their shared long-term loan facility.

The $200 million will be provided via a subscription for Lynas shares at a price that will be the higher of the 5-day volume-weighted average price (VWAP) immediately before and following the announcement.

Lynas will use the cash to fund current and planned projects to increase production.

Part of the deal involves Lynas giving supply priority to the Japanese market until 2038.

Lynas CEO Amanda Lacaze said:

Lynas has a huge appetite for growth and a large capital investment plan. This $200 million capital investment from the Japanese Government, through JARE, will boost our balance sheet and assist in assuring the delivery of our major growth projects.

JARE has been a valued and strategic partner to Lynas since 2011 and we welcome these new
agreements which better reflect demand forecasts from the Japanese rare earths market.

Today, Lynas is the market leading supplier of NdPr to the Japanese rare earths industry and these new
agreements demonstrate the deep commitment of JARE to the ongoing growth and success of our
company.

Investors watch Lynas performance

The Lynas share price is down 4% in 2023 while the S&P/ASX All Ordinaries Index (ASX: XAO) is up 5%.

Over the past 12 months, Lynas shares have lost 23% in value while All Ords stocks have risen by 3.3%.

The post Lynas share price rebounds on $200m Japanese Government investment appeared first on The Motley Fool Australia.

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More reading

• Lynas Rare Earths has plunged 20% in a month: Is it a buy?
• Why did the Lynas share price just hit a 52-week low?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why Brainchip, Lynas, Megaport, and Universal Store shares are dropping today
• Why Fortescue, Lynas, Myer, and New Hope shares are dropping today

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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 market may be sinking today, but the same cannot be said for the Mesoblast Ltd (ASX: MSB) share price.

In morning trade, the biotech company’s shares rocketed as much as 23% to $1.14.

The Mesoblast share price has pulled back a touch since then but remains up 13% to $1.03.

Why is the Mesoblast share price rocketing higher?

Investors have been buying the company’s shares after it was given some good news by the United States Food and Drug Administration (FDA).

According to the release, the FDA’s Office of Therapeutic Products has accepted the company’s Biologics License Application resubmission for remestemcel-L in the treatment of children with steroid-refractory acute graft versus host disease (SR-aGVHD).

And while this is not an approval, it is a big step in the right direction. Furthermore, the release notes that the FDA considers the resubmission to be a complete response to previous feedback and has set a Prescription Drug User Fee Act (PDUFA) goal date of 2 August.

What is a PDUFA?

My US colleagues cover the PDUFA in detail here. But here’s a summary:

The PDUFA’s primary goal was to authorize the FDA to collect fees from drugmakers to help pay for the FDA staff needed to review regulatory filings for drugs. But the pharmaceutical industry objected to paying money to the FDA without anything guaranteed in return. The PDUFA helps the FDA by providing the agency with a way to generate money and establishes a set timeline for the agency to make approval decisions.

All in all, this guarantees that Mesoblast will have an answer from the FDA by 2 August for remestemcel-L in the treatment of children with SR-aGVHD.

Mesoblast’s Chief Executive, Silviu Itescu, was pleased with the news. He said:

Over the last two years we have worked tirelessly to address the issues previously raised by FDA. We look forward to working closely with the Agency over the review period with the aim to make remestemcel-L available as a therapy for children suffering from SR-aGVHD.

The post Mesoblast share price rockets 23% on FDA news appeared first on The Motley Fool Australia.

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More reading

• Why De Grey, Kogan, Mayne Pharma, and Mesoblast shares are charging higher
• 2 ASX All Ords shares smashing new 52-week highs on Thursday
• Mesoblast share price soars 11% on FDA update

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 Carsales.Com Ltd (ASX: CAR) share price won’t be going anywhere on Wednesday.

This morning, the auto listings company requested a trading halt of its shares.

Why is the Carsales share price on ice?

Carsales requested a trading halt this morning so it could undertake a capital raising to fund a major acquisition.

According to the release, the company has signed an agreement with Brazil’s Banco Santander to acquire an additional 40% of Webmotors for approximately A$353 million. Webmotors is the number one automotive digital marketplace in Brazil.

This agreement will see Carsales increase its stake in Webmotors to 70%, with Banco Santander retaining a 30% stake.

The release also notes that Webmotors and Banco Santander will continue their valuable contractual relationship, with the bank continuing to be the credit and financial solutions partner for finance and insurance transactions made through the Webmotors platform.

At the same time, Carsales expects that the equity change will allow Webmotors to benefit further from its expertise in digital marketing, customer experience, products, and services within the digital automotive ecosystem.

It believes this will allow Webmotors to strengthen its market position while retaining the strong support of Banco Santander, which is the auto loans market leader in Brazil.

The transaction is expected to be earnings per share neutral in the first full year after completion and accretive thereafter.

Carsales CEO, Cameron McIntyre, commented:

Webmotors is an outstanding automotive digital marketplace business with an innovative culture, a proven track record of strong growth over time and significant opportunities for future growth. Closer alignment to the carsales business makes strategic sense for both carsales and Santander to ensure webmotors’ continued long term success and delivery of value to our shareholders. With this acquisition carsales and Santander reverse equity positions in webmotors and maintain Santander’s important commercial exclusivity for credit and financial solutions on the webmotors platform.

Capital raising

To fund the acquisition, Carsales is launching a fully underwritten 1 for 14.01 pro-rata accelerated renounceable entitlement offer (institutional and retail) aiming to raise approximately $500 million through the issue of 25.1 million new Carsales shares at $19.95 per share.

This represents an 11.9% discount to the Carsales share price at the close of play on Tuesday.

The post Carsales share price on ice amid $500m cap raise and acquisition news appeared first on The Motley Fool Australia.

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More reading

• 3 ‘quality’ ASX shares to buy now before they rocket: experts
• 4 ASX 200 stocks smashing new 52-week highs on Wednesday
• Carsales share price marches higher on profit and dividend boost

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 Carsales.com. 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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I think that ASX shares are a great way to become wealthy over time. The exchange-traded fund (ETF) Vanguard Australian Shares Index ETF (ASX: VAS) is a very popular way for Aussies to invest in the ASX share market.

The Vanguard Australian Shares Index ETF has assets under management (AUM) of around $12.5 billion and it’s steadily growing over time as more people add money into share market.

With it being such a popular choice, I think it’s worth asking whether it holds the ticket to building long-term wealth.

What does Vanguard Australian Shares Index ETF do?

The purpose of the ETF is to track the return of the S&P/ASX 300 Index (ASX: XKO). That index represents 300 of the biggest businesses on the ASX.

The five biggest positions are: BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC).

There are 295 other holdings including banks, miners, retailers and so on.

If the share price performance of the underlying businesses is good, the ETF will rise. If dividends are paid by the companies, those payments will be passed through to investors.

One of the most helpful things about this ETF is how cheap the management fees are. The lower the costs, the more of the net returns are left in the hands of the investor. It currently has an annual management fee of 0.10%.

Has Vanguard Australian Shares Index ETF helped grow wealth?

Firstly, past performance is not a reliable indicator of future performance.

Looking at the returns over the decade to 31 January 2023, the total return was an average of 8.7% per year. That level of return would turn $1,000 into $2,000 in less than nine years. In other words, investors could double their money in eight and a bit years.

Of course, each individual invests at different times and at different prices, so the returns may differ somewhat. But, the ETF itself has provided the ASX share market return, which has been reasonable over a long period.

I wouldn’t suggest someone put all of their investment money into one choice. But, let’s imagine someone puts all of their monthly savings into buying units of the Vanguard Australian Shares Index ETF.

Investing $1,500 a month into the ETF, and if it returned an average of 8.7% per annum, after 20 years they would have around $890,000.

That sounds like a good amount of money to me.

Is it the ticket to building wealth?

I think Vanguard Australian Shares Index ETF is a good choice. But, if we invest all our money in choice A, then we aren’t able to invest in choice B.

For starters, I’d want diversification in my portfolio. The ASX share market is only a small part of the global share market. I think it’s a good idea to own a bit of US shares, some European shares and so on.

We don’t need to go and individually buy those international companies. Another ETF can do the trick. Vanguard Msci Index International Shares ETF (ASX: VGS) invests in a portfolio of global shares and iShares S&P 500 ETF (ASX: IVV) invests in a portfolio of 500 US-listed businesses.

Not only do these ETFs offer diversification, but I think they could achieve stronger returns over the long term.

The ASX is dominated by large miners and domestically-focused banks. I don’t think it’s surprising that distribution income from the ETF makes up more than half of the total return over the past decade. That also implies there hasn’t been that much capital growth.

I think businesses like Alphabet and Microsoft are good examples of businesses that have targeted the global economy for growth. It gives the businesses a stronger growth runway, in my opinion, so they can deliver better returns.

The MSCI World Net Total Return Index (AUD), which is a benchmark for the global share market, has returned an average of 13.4% per year over the past decade. That’s despite all the volatility we’ve seen since the start of 2022.

If an investor invested $1,500 per month for 20 years, and the investment returned 13.4% per annum, it would turn into $1.52 million. We can’t know what future returns will be, but I think it’s worth investing in ASX growth shares or global shares that could grow more over time.

However, the Vanguard Australian Shares Index ETF seems like a worthwhile investment that can produce reasonable returns.

The post Does the Vanguard Australian Shares Index ETF (VAS) hold the ticket to building long-term wealth? appeared first on The Motley Fool Australia.

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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 CSL, Microsoft, and Vanguard Msci Index International Shares ETF. The Motley Fool Australia has recommended Vanguard Msci Index International Shares ETF, Westpac Banking, and iShares S&p 500 ETF. 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 had a rough time of it last month. The decline continued into the first week of March.

In the past month, the Commonwealth Bank of Australia (ASX: CBA) share price has dropped 10%, the Westpac Banking Corp (ASX: WBC) share price has fallen 6.4%, the National Australia Bank Ltd (ASX: NAB) share price has dropped 7% and the ANZ Group Holdings Ltd (ASX: ANZ) share price declined 5.5%.

This negative return compares to a decline of just 1.7% for the S&P/ASX 200 Index (ASX: XJO) over the last month.

But, one broker thinks that banks could underperform the ASX 200 over the rest of 2023.

Negative outlook for ASX 200 bank shares

Morgan Stanley has suggested that the banking sector will underperform the ASX 200 over the rest of the year because of a combination of an economic slowdown, ongoing interest rate increases, falling house prices and higher mortgage serviceability hurdles, which could all hurt loan growth, according to reporting by The Australian.

The broker suggests that lending margins are peaking, with refinancing and discounting up, while deposit pricing benefits moderate.

Morgan Stanley’s Richard Wiles suggested that the current situation is increasing “the likelihood that major bank profit margins peak earlier and at a lower level.”

Increasing interest rates and an increasingly competitive environment are causing more volatility to bank margins. The broker suggested that margins are likely to fall in FY24.

Morgan Stanley reportedly pointed out that there don’t appear to be any near-term catalysts to accelerate loan growth. It’s also likely that loan losses are likely to worsen from here.

The broker wrote:

We forecast loss rates to rise to 16bp of loans in FY23 (estimate) and 29bp in FY24 (estimate), resulting in a double-digit earnings headwind in each year.

While FY23 could see good profit growth for the banks, the broker estimates that profit at the ASX 200 bank shares will drop by an average of 12% in FY24.

What’s going to happen with interest rates next?

Yesterday, the Reserve Bank of Australia (RBA) announced that it was increasing the cash rate target by 25 basis points to 3.60%.

The RBA noted that global inflation remains “very high” and that services price inflation “remains high”, with strong demand for some services over the summer.

Australia’s central bank noted that rents are increasing “at the fastest rate in some years”. It’s expecting inflation to decline in 2023 and 2024, reaching around 3% in mid-2025. The RBA said that medium-term inflation expectations remain “well anchored, and it is important that this remains the case.”

It was also noted that wage growth is “continuing to pick up in response to the tight labour market and higher inflation.”

In terms of the outlook, the RBA said that it “expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary.”

What does this mean for ASX 200 bank shares?

It does seem as though the share prices of the banks now reflect the tougher situation for banks.

So, I think there may not be that much more downside unless the bank’s bank losses are worse than expected in the year ahead.

I think that banks will still report higher profits and dividends in FY23. The dividends could rise in the years ahead and boost the cash returns of shareholders.

The post ASX 200 bank shares slump could continue: Morgan Stanley appeared first on The Motley Fool Australia.

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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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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A year or two ago, Lynas Rare Earths Ltd (ASX: LYC) shares enjoyed a rapid ascent as the market recognised the business as the only major producer of rare earths outside of China.

To boot, rare earths were a critical ingredient in batteries for electric vehicles, which are enjoying a surge in popularity.

However, the Lynas share price has crashed almost 20% over the past month. In fact, the stock has languished over the past 12 months, losing more than 26%.

So what is happening? And is it still a stock worth buying?

Rare earths market has been shaken up

According to Shaw and Partners portfolio manager James Gerrish, an announcement from a major buyer of rare earths shook up producers recently.

“The rare earths market has been volatile this week on the back of Tesla Inc (NASDAQ: TSLA) announcing plans to install permanent magnets in their cars to reduce the reliance on the expensive materials,” he said in a Market Matters Q&A.

“Very little detail was provided on the plans and we think there is a lot of work to get through before this becomes a reality.”

But this development did not worry Gerrish.

“Tesla, and EVs in general, are just one of many demand sources of rare earth materials,” he said.

“We continue to like Lynas, the biggest player in the space outside of China.”

Due to the geopolitical importance of its status as a rare producer in the first world, Gerrish noted Lynas enjoys government support from both Australia and the United States.

The share price drop in the past month and year merely presents an attractive entry point.

“While there are some risks around execution with the new Kalgoorlie plant, we think the market is taking a harsher view than what the company will deliver.”

Lynas has plenty of fans

Gerrish is not the only professional with a positive outlook for Lynas Rare Earths.

The Motley Fool reported a fortnight ago that the analysts at Firetrail declared the stock as one of the best to buy for the next decade.

“To make batteries, we need lithium, rare earths, nickel, cobalt and copper,” stated the team.

“We hold Lynas Rare Earths Ltd in our Australian portfolios.”

Wilsons equities strategist Rob Crookston flagged last month that Lynas could even be an attractive takeover target.

“We are anticipating a robust year for resources stocks, which will include M&A activity as the sector undertakes growth and consolidation to take advantage of strong balance sheets after a bumper 2022,” he said in a memo to clients.

“We believe the large major miners are looking to diversify towards EV minerals.”

The post Lynas Rare Earths has plunged 20% in a month: Is it a buy? appeared first on The Motley Fool Australia.

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• Why did the Lynas share price just hit a 52-week low?
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• Why Brainchip, Lynas, Megaport, and Universal Store shares are dropping today
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• Why is the Lynas share price being thumped on Thursday?

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. 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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