BoA Slips Lower On Weaker FICC Growth

Posted on | by Todd | Leave a Comment on BoA Slips Lower On Weaker FICC Growth

Bank of America reported a 34% rise in first-quarter profit last night, topping Wall Street estimates, as the bank benefited from higher interest rates and growth in loans and deposits.

However, BAC under-performed in fixed income, currency and commodities (FICC) trading because of a decline in bond issuance from corporations.

Trading revenue was up only 1%. Equities trading revenue, excluding items, rose 38%, while revenue from trading fixed income fell 13%.

BAC’s trading results mirrored those of rivals JP Morgan and Citigroup; revenue from stock trading rose at both the banks, but weakness in bond trading crimped total trading revenue growth, which is why their share prices remain soft.

To a large degree, the local banks face the same headwinds but with the added risk of the Royal Bank commission.

Hearings from the commission are back on this week with QBE and SUN included in the questioning over insurance related business practices.

Our ALGO engine triggered a sell signal late last year in both QBE and SUN at $10.40 and $14.05, respectfully.

We remain cautious of the local banking names and see the risk continue to be skewed to the downside, especially in the regional names like BOQ and BEN.

QBE

SUNCORP

BoQ

Bendigo Bank

 

Regional Banks Continue To Slide Lower

Posted on | by Todd | Leave a Comment on Regional Banks Continue To Slide Lower

Since posting a intra-day high of $12.05 on January 10th, shares of BEN have dropped over 6% and have slipped to a 2-month low of $11.32 in early trade.

Similarly, shares of BOQ have lost 4.6% since the start of the year and posted a 5-month low of $12.26 last Friday.

Recent mortgage forecasts have illustrated that in an overall loan market which is contracting, the regional banks will face the strongest headwinds to achieving the margins and loan growth that they have created over the last three years.

Our ALGO engine triggered a sell signal for BEN on August 16th at $12.45, and for BOQ at $15.50 on August 7th.

This has been a popular “short” trade for investors on our SAXOGo platform.

We expect the next level of downside support at $11.00 for BEN and $12.05 for BOQ.

Bendigo Bank
 

Bank of Queensland

ALGO Udate: Bendigo Battered After AGM

Posted on | by Todd | Leave a Comment on ALGO Udate: Bendigo Battered After AGM

Shares in BEN dropped close to 5% yesterday after CEO Mike Hirst told investors at the AGM that APRA’s lending limits had dampened growth momentum and made it harder to compete.

He also said that APRA’s caps on interest-only lending had forced the bank to “slam on the brakes” on these types of loans. Further, he expects total balance sheet growth to be relatively flat during 2018.

Our ALGO engine triggered a sell signal on BEN on August 16th at $12.50. This level has never been challenged during the recent correction higher and we now look at the June 23rd low of $10.50 as the next key support level.

It’s worth noting that yesterday’s sharp drop in the share price was on very heavy volume of 4.2 million shares. The average daily volume over the last three months in BEN has been in the 1.4 million share range.

Bendigo

 

ALGO Update: Stay Short BOQ and BEN

Posted on | by Todd | Leave a Comment on ALGO Update: Stay Short BOQ and BEN

The ALGO engine triggered a sell signal for BOQ on July 25th at $12.00, and for BEN on August 18th at $12.49.

Over the last two weeks, shares of these two regional banks have sold off less than the shares of the 5 larger domestic banking names.

Over the near-term, we see that divergence fading and expect the downside momentum in BEN and BOQ to pick up pace going into September.

We have adjusted our target prices to $11.15 in BEN and $12.05 for BOQ.

Bank Of Queensland

Bendigo Bank

Short Banks and Retailers

Posted on | by Leon Hinde | Leave a Comment on Short Banks and Retailers

We like the short side of the banks and retailers coming into what will likely be a volatile period for equity markets in September & October.

The regional banks, BOQ & BEN look expensive.

Following their profit announcement on the 31st August, HVN should be on your wishlist as a potential short, with a stop losses above recent highs.

 

 

 

Algo Short Signal – Bendigo Bank

Posted on | by Leon Hinde | Leave a Comment on Algo Short Signal – Bendigo Bank

Our Algo Engine is now flagging the “lower high” technical structure in Bendigo Bank.

The stock has seen a short squeeze following the recent earnings result and is now likely to find renewed selling pressure at $12.40.

Investors should remain on the short side of this trade with a stop loss on a break back-up through the $12.50 range.

Chart – BEN

We also have  a short signal in Bank of Queensland.

Chart – BOQ

 

Bendigo Bank – FY17 Earnings.

Posted on | by Leon Hinde | Leave a Comment on Bendigo Bank – FY17 Earnings.

Bendigo Bank delivered a solid FY17 cash profit of $418 million,  which was in-line with consensus.  Improving margin trends and dividend growth helped push the shares of BEN higher in yesterday’s trading.

We feel the regional banks will struggle in the next 12 to 24 months with flat earnings, higher costs and increasing debt debt provisioning.

Assuming flat earnings and dividend growth into FY18, we have BEN trading on a 6% forward yield.

Chart – BEN

 

 

 

 

How Long Will The XJO Range Trade?

Posted on | by Todd | Leave a Comment on How Long Will The XJO Range Trade?

Over the last 12 weeks, the XJO index has traded in a range bound, pennant formation.

In technical terms, this is known as an “indecision” pattern and is usually resolved by a measured move through the top of the range, or broken through the bottom of the range.

The current price set-up has been bound by the June 8th low of 5606 and capped by the June 15th high of 5850.

After one of these levels are breached, the measured move would be expected to reach the May 2nd high of 5950, or drop down through the low price of 5606 posted on February 6th.

The banking sector is the heaviest weighted group of stocks in the XJO. As such, the direction of the banking shares will largely determine the direction of the XJO index.

Our base case has been that the major banks will face challenges to grow revenue in the current market environment and that pricing risks are skewed to the downside.

These valuation concerns apply even stronger to the regional banks; BOQ and BEN. After recent price rebounds in these two stocks, we believe that they could trade lower and reach $10.50 and $10.00, respectfully.

XJO

BOQ

Bendigo