CBA, ANZ, Westpac, and NAB shares react to the RBA decision
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Australian bank stocks retreated slightly on Tuesday after the Reserve Bank of Australia (RBA) delivered its first monetary policy decision of the year. Commonwealth Bank shares retreated by 1% to $114.37 while Westpac and NAB fell to $24.15 and $32.2, respectively.
ANZ vs Westpac vs NAB vs CBA stocks
Australia’s Big Four are soaring
Still, Australia’s big four banks have done well in the past few months and are all hovering at their all-time high. NAB Bank is a few points below its record high of $32.60. ANZ Bank shares have risen in the past four straight months and are now sitting at their all-time high of $27.43.
Westpac and CBA have also been in a remarkable rally, outperforming their UK peers like Barclays and Lloyds. As shown above, they have all jumped by more than 8% in the past 12 months while the closely watched Invesco Banking ETF (KBW) is down by 13%.
Australian banks reacted to the latest RBA decision, in which the committee left interest rates unchanged at 4.35%, the highest point in 16 years. In its statement, the bank noted that inflation is still a threat to the economy. As a result, the committee left the door for another rate hike wide open.
But investors are not buying this, with most of them expecting the bank to start cutting in May this year. Besides, there are signs that inflation is moving downwards while Australia’s and Chinese economies are slowing.
Economic numbers released recently showed that Australia’s inflation dropped to 4.3% in the fourth quarter. In its statement, the bank hinted that inflation will move to its target band of 2% and 3% in 2026.
Net interest income rises
Australian banks have benefited substantially from the ongoing high-interest rate environment. The most recent results revealed that Westpac’s profit jumped to $7.2 billion, forcing the management to start share buybacks.
CBA, one of the most premium banks in the country, recorded a $10 billion profit. ANZ and NAB profits also jumped to $4.3 billion and $7.73 billion, respectively. This performance was mostly because of the jump in the Net Interest Income (NII) because of high rates. Banks also recorded lower-than-expected delinquencies.
Therefore, the RBA statement means that these banks will likely report strong financial results this year, leading to more profits.
Still, there are concerns about these banks’ valuations. Precisely, some analysts are worried about the valuations, especially that of CBA, which trades at 22 times forward PE and a price-to-book multiple of 2.7.
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