Westpac’s results sent its share price down 3.5 per cent to $29.95. Photo: James Davies
Australian shares fell back on Monday after a poor earnings result from Westpac weighed on banking stocks, offsetting gains in Telstra and resources stocks.
The market almost rebounded from heavy early losses to record a gain for the day but ultimately the benchmark S&P/ASX200 dropped 0.2 per cent to 5243.0 while the broader All Ordinaries dropped 0.1 per cent to 5312.0.
CommSec analyst Stephen Daghlian said the session “could have been worse”.
“At one stage today we were down by 1.2 per cent in the first couple of hours and we bounced off the lows,” he said.
“If there’s one thing that’s holding things back most it’s been the financials and in particular Westpac which is down 4 per cent over its earnings. That’s dragged the other majors down with it.”
The result, slightly softer than expected, sent the share price down 3.5 per cent to $29.95.
Westpac said its institutional lending business was hit by “significantly higher” impairment charges because of four major customers, which added $252 million to its bad debt charge. The bank will pay an interim dividend of 94c a share, which is 1c more than a year earlier and flat compared with the previous six months.
Analysts had expected a profit of about $4 billion and a 94c interim dividend and it is the first time in several years the Westpac has not increased the dividend over the half-year.
“Overall, it was a weak result with soft underlying profit trends,” said Watermark Funds Management investment analyst Omkar Joshi. “There is very little to get excited about in this result.”
“Non-interest income was the key area of weakness, coming in 6 per cent below expectations.”
The rest of the banks also had a poor day as investors brace for results this week from ANZ Banking Group, National Australia Bank and Macquarie Group. Tuesday’s Federal budget and cash rate decision from the Reserve Bank of Australia may also put pressure on the majors.
ANZ shed 2.2 per cent to $23.73, Commonwealth Bank fell 2.1 per cent to $72.34 and NAB declined 2 per cent to $26.63.
A 5 per cent lift in the iron ore price boosted the blue-chip miners, with BHP Billiton gaining 1.1 per cent to $20.92 and Rio Tinto putting on 1.6 per cent to $52.40.
Gold nudged $US1300 an ounce as a slide in the US dollar against the yen and weakness in global equities bolsters the precious metal.
Spot gold fetched $1292.95 on Monday, after climbing to $US1296.11 late on Friday, the highest level since January 2015.
“The continued strength in the yen against the US dollar and the lacklustre earnings season has seen investor demand remain strong in the gold market,” ANZ economist Jo Masters said.
Gold miners were among the day’s best performers, with Newcrest firming 4.6 per cent to $19.84, Evolution Mining rocketing 9.7 per cent to $2.15 and Regis Resources gaining 3.4 per cent to $3.
Blue-chip stock Telstra lifted 2.8 per cent to $5.51 after it announced it would hand $1.5 billion back to investors after selling its stake in Autohome.
The company did not confirm whether the capital management initiative would take the form of a share buyback or special dividend, but it will be in addition to ordinary dividend.
Specific details will be announced when the company announces its full-year results on August 11.
Embattled ASX listed law-firm Slater & Gordon has reached an agreement with its bankers, avoiding bankruptcy and lifting shares a full 100 per cent to 59 cents.
In a statement to the stock exchange, the company said it had agreed to amendments to the terms of its existing facility agreement that ensures loans do not have to be repaid until May 2018.
This was a “clear sign of endorsement” for the company’s “improvement program”, the statement said.
A year ago Slaters stock was worth $6.35 each.
Spanish predator Ferrovial extended its $769 million takeover offer for Manus Island detention centre operator Broadspectrum and declared it unconditional after building a stake of 59 per cent of Broadspectrum shares.
Ferrovial said its offer for the maintenance services and asset management firm had been automatically extended until May 13 because it had achieved acceptances of more than 50 per cent. Broadspectrum firmed 1 per cent to $1.49.