Bendigo Bank – 1H19

Bendigo reported earnings slightly below market consensus.

1H19 cash profit came in at $220m, however, we continue to see challenging conditions for the regional banks.

BEN and BOQ both display lower high formations and are under Algo Engine sell signals.

 

Earnings Calendar

Amcor reports on Monday, we expect the earnings result to support the  current share price rally. AMC has been a high conviction call, expressed on the blog and in the “Opportunities in Review webinar”.

Bendigo Bank, (BEN)  reports on Monday, we’re cautious of this name and see the money being made on the short side.

Origin Energy (ORG) reports next Friday, we feel the LNG related income will surprise on the upside.

For more detail on the earnings season, register for Monday’s Opportunities in Review webinar.

 

 

 

 

Sell Signal In Bank Shares

All four major banks, and the regional names, are now displaying Algo Engine sell signals. Currently we have no bank long holdings within our model portfolio.

Within the financial sector our preference remains for ASX and IAG. Both offer a fully franked dividend yield, and when combined with a covered call, we’re generating 10 – 12% annualized cash flow.

Our concern about the low ROE for the domestic banks is driven by weak housing loan growth and the rising cost of funds. These conditions keep us cautious on the banks, especially when combined with the present group of ALGO sell signals.

 

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

 

ALGO Update: Bendigo Extends To The Downside

Our ALGO engine triggered a sell signal in BEN at $12.40 last August.

The initial downside target was in the $10.90, which has been met.

Internal momentum indicators are still pointing lower and the next level of support will be found near the June lows around $10.30.

Bendigo Bank