NAB slashes its dividend and asks for A$3.5b in fresh capital after bad debts more than double, but BNZ profit rises 5.6 percent. ASB sees a 6 percent fall in house prices, before a quick rebound

Under pressure: BNZ’s owner, National Australia Bank (NAB), revealed its interim results a week ahead of schedule yesterday in Australia to get in ahead of its rivals with a big capital raising. Recently appointed Kiwi CEO Ross McEwan said the bank was taking proactive steps to shore up its books as Australia faced a possible “prolonged and severe economic downturn”.

Tough times ahead: NAB revealed a 51 percent fall in its March half-year cash profit to A$1.436 billion after its bad debt charge more than doubled to A$1.161 billion. NAB also unveiled plans for a A$3.5 billion capital raise, while cutting its interim dividend by A53 cents to A30c per share. NAB shares were placed in a trading halt following the announcement of the capital raising and last traded at A$15.76.

NAB’s results revealed Bank of New Zealand’s cash earnings rose 5.6 per cent in the six months ended March, due to an 8.5 percent lift in residential lending and lower bad debt provisions. The bank’s full results will be released today, while ANZ NZ will report its interim results this Thursday (April 30), followed by Westpac NZ next Monday, May 4.

Weakening: ASB Bank is picking house prices to fall by 6 percent in the wake of the coronavirus outbreak, though they aren’t expecting prices to stay down for too long. The bank expects the property market to recover to pre-covid19 levels by next year, helped by cheap credit and a gradual recovery in the labour market. Without the virus, the bank said the market had been on track to maintain its record run.

ASB is also forecasting unemployment to rise from four percent to just under nine percent and wage growth to slow sharply. It said servicing existing mortgage debt would become more challenging for those caught up in the downturn.

Not as bad as GFC? During the 2008 global financial crisis, New Zealand’s unemployment rate ticked up from 3.3 percent to 6.5 percent, while house prices corrected by 12 percent.

Financial backstop: Wellington City Council has agreed to underwrite a $75 million loan as part of a refinancing deal by the city’s airport. Final details are still to be worked out between the airport and fellow shareholder Infratil, however the Council said the support was likely to be in the form of an underwrite of a convertible equity-style arrangement.

The airport is currently only operating at about 5 percent of its usual domestic capacity and the new funding facility was unlikely to be used, the Council said, adding the move would also provide confidence to lenders and rating agencies.

The Bank of Japan kept interest rates steady at its policy meeting yesterday and announced more easing measures as it tries to offset economic fallout from the coronavirus pandemic and address corporate funding strains. The central bank said it would now buy an unlimited amount of government bonds, scrapping an annual cap of 80 trillion yen (US$745 billion).

The move however was largely symbolic, as the central bank has in recent years only been buying about a quarter of that amount annually.

Whatever it takes: Japanese Prime Minister Shinzo Abe has already committed roughly US$1.1 trillion to protect the country from virus-related fallout. The Bank of Japan has forecast the Japanese economy will contract between 3 percent and 5 percent this year.

Still to come: The US Federal Reserve and the European Central Bank are also set to meet later this week. 

No worries: While coronavirus has severely damaged many businesses globally, one of the few that seems to have benefited from the pandemic is Amazon. The company’s shares have surged more than 30 percent this year finishing last week at a new all-time high of US$2,410.22. The Jeff Bezos-led company is now worth US$1.2 trillion — about the same as Apple and trailing only cloud rival Microsoft in the battle for the most valuable publicly traded firm in the United States.

Primed to deliver: All of this bodes well for Amazon as it gets ready to report its first quarter earnings later this week. Analysts expect that the company will report a more than 20 percent increase in sales — to a whopping $73 billion.

Nicht gut: German sportswear giant Adidas has forecast its sales will fall by 40 percent in the second quarter due to the coronavirus outbreak. The company reported a 19 percent decline in net sales for the first quarter from the year before to 4.75 billion euros (US$5.16 billion) as 70 percent of its stores worldwide closed as a result of the Covid-19 pandemic.

Nieder: Its first-quarter net income was 26 million euros, down 96 percent from the same period last year, and Adidas said that owing to uncertainty over the duration of store closures, it would be unable to offer a full-year outlook at present. E-commerce — which it described as the only channel that has remained fully operational in most parts of the world — rose 35 percent but failed to offset the loss from pandemic-induced lockdowns around the world.

Facing the music: It’s a big week for embattled U.S. airline manufacturer Boeing with the company set to hold its annual meeting, report first-quarter results and face the application deadline for a multi-billion-dollar aid package from the federal government. The company is juggling multiple headwinds including how it will deal with the impact of coronavirus, particularly its impact on aircraft sales, but perhaps more importantly what the future holds for its 737 MAX fleet, which remain grounded due to a software malfunction the company has still been unable to fix.

Pink slips: Boeing is widely expected to lay off at least 10 percent of its 160,000 employees, with some of the reduction expected to come through early retirement packages and natural attrition.

Reality check: In April last year there were 31 airlines flying 740,000 seats into New Zealand. This April there were just three airlines flying 40,000 seats into the country.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

Leave a comment