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A profit surge at Commonwealth Bank helped lift the share market to a two-week high as investors snapped up battered bank stocks.
The S&P/ASX 200 rallied 19.5 points or 0.27 per cent by mid-session. The advance put the benchmark on track to close above 7200 for the first time since January 20.
The big four high-street banks rose after the largest, CBA, reported a 26 per cent jump in half-year profit. Mineral Resources, Bapcor and IDP Education dragged after reporting earnings.
What’s driving the market
The interim earnings season gained momentum after an increased dividend, share buyback and profit hike at CBA restored confidence following poorly-received updates last week from Westpac and ANZ. The index heavyweight’s first-half profit expanded to $4.74 billion, allowing for a 17 per cent increase in the interim dividend to $1.75 per share.
The blowout result came despite pressure on margins. Net interest margin tightened 14 basis points to 1.92 per cent. The bank announced it will buy back up to $2 billion shares on-market.
Shares in CBA jumped 5.07 per cent. Westpac rose 2.43 per cent, ANZ 1.04 per cent and NAB 0.9 per cent. The financial sector bore much of the pain during last month’s US rates tantrum, falling to a ten-month low.
Helping the sector this morning was a spike in long-term lending rates. The yield on ten-year Australian government bonds climbed to their highest since March 2019. Higher rates offer lenders improved margin opportunities.
Financials and technology were the pick of the sectors during a mixed morning. In the red were sectors that compete with bonds for investment flows when yields weaken. Healthcare, utilities and REITs all declined. Gold miners and industrials advanced.
“Earnings season is moving into full swing, with investors weighing rising inflation against corporate earnings results,” Kalkine Group CEO Kunal Sawhney said.
“The share market welcomed a strong set of earnings from Commonwealth Bank, Computershare and Bailador this morning. However, certain shares failed to lure investors despite robust earnings results, including IDP Education and Megaport.”
Wall Street offered solid leads following a bank-led rally overnight. The Dow gained 1.06 per cent. S&P 500 added 0.84 per cent.
Going up
Computershare jumped 11.94 per cent to an all-time high after upgrading its full-year outlook. The share registry expects earnings per share to increase 9 per cent versus the prior corresponding period following a strong first half. The company said it stands to benefit from higher rates this year.
Aluminium producers responded to a 14-year high in prices on the London Metal Exchange. Diversified miner South32 gained 3.7 per cent. Alumina firmed 2.78 per cent.
A record half lifted Temple & Webster 11.8 per cent. The online furniture retailer’s revenues increased 46 per cent to $235.4 million. CEO Mark Coulter said business had tripled in two years.
Megaport tacked on 1.06 per cent after reporting a half-year net loss of $20.2 million. Revenues grew 42 per cent from the prior corresponding period to $51.2 million. Monthly recurring revenues grew 23 per cent.
Furniture retailer Nick Scali bounced 3.35 per cent after dousing speculation the Scali family planned to trim their holding. The board said it had been assured the family had no plans to sell shares at the current time.
Outside of the banks, the morning’s best performers at the pointy end of the market were Newcrest +1.02 per cent and Wesfarmers +0.93 per cent.
Going down
Mineral Resources dropped 8.78 per cent after a 12 per cent slump in half-year revenue and an 80 per cent dive in earnings. A rebound in lithium prices was overshadowed by last year’s sharp decline in iron ore prices.
“The challenges during 1H22 were amplified by the collapse in iron ore prices,” Managing Director Chris Ellison said. “This has delivered our worst first half financial result in three years.
“These results do not reflect the substantial progress in our iron ore, lithium and gas businesses during the last six months which will create significant value for decades to come and which underpins our long-term growth for our Mining Services division.”
Syrah Resources fell 9.25 per cent after tapping investors for $192 million to fund the construction of a downstream graphite facility in the US.
BWP Trust eased 1 per cent after reporting revenues were broadly flat across the first half. The trust maintained its interim distribution at 9.02 cents per unit despite a 142 per cent jump in profit to $348.3 million.
Record revenues failed to lift IDP Education. The student placement service increased half-year revenue by 47 per cent from the prior corresponding period to $397 million. Earnings increased 61 per cent to $77.9 million. The share price wilted 3.54 per cent.
A 14.7 per cent decline in half-year profit pushed Bapcor down 5.38 per cent. The automotive parts business said the result was “solid” in light of lockdowns and restrictions. Revenues increased “materially” in Q2 as Covid restrictions eased.
The major miners lost their hold on multi-month highs. BHP dropped 2.03 per cent, Fortescue Metals 1.8 per cent and Rio Tinto 1.08 per cent.
Other markets
The Asia Dow put on 1.23 per cent, China’s Shanghai Composite 0.17 per cent, Hong Kong’s Hang Seng 1.92 per cent and Japan’s Nikkei 0.81 per cent.
S&P 500 futures rose 12 points or 0.26 per cent.
Oil mounted a partial rebound from two days of selling. Brent crude firmed 30 US cents or 0.33 per cent to US$91.08 a barrel.
Gold retreated US$1.20 or 0.07 per cent to US$1,826.70 an ounce.
The dollar inched up 0.03 per cent to 71.46 US cents.
