CBA Warns of slowing Credit Growth 

What made the news today?

• Finance stocks sell off after CBA report

• Cochlear continues post- Covid recovery

• Wesfarmers gains on Kmart growth

• Treasury Wines premium brands underperform

The Financial sector got hit hard today today despite Commonwealth Bank reporting net profit after tax of $5.15 billion for the half year along with issuing an interim dividend of $2.10 a share - an increase of 35 cents from the prior year. The ASX200 ended the day 78.70 pts or 1.06% lower to close at 7,352.20. Commonwealth Bank fell 5.7% on the back of its report whilst NAB (-4.1%), Westpac (-4.3%) and ANZ (-3.8%) all dropped on the day.

From a sector standpoint, six of eleven market segments dropped in value on the day. Financials saw the biggest drop, falling by 3.39% followed by the Staples sector (-1.36%) Utilities came out on top as the highest performing sector, posting a gain of 1.12%.

The two stocks that fell the most on the index today were Brainchip Holdings and Corporate Travel Management, with falls of of 13.56 and 8.70 percent respectively 

Economy

The US CPI read for January dropped overnight with the year-over-year change in the US Consumer Price Index coming in at 6.41%, compared to 6.45% last month and 7.41% last year. 

Quick Singles

• Netwealth Group (ASX: NWL) share price increased 2.7% to $13.64 following the release of its half-year results where it reported funds under administration of $62.4B.

• Wesfarmers (ASX: WES) share price was up 1.3% to $49.35 following the release of the conglomerate's half-year earnings, reporting NPAT growth of 14.1% to $1,381m

• Promedicus (ASX:PME) shares were slightly higher today, gaining 0.6% to $65.47 after reporting half-year revenue growth of 28% and net profit increase of 31.5%

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Top Story

Commonwealth Bank Reports Record Profits but Warns of Slowing Credit Growth

Commonwealth Bank of Australia has reported a record first-half profit of $5.2 billion, driven by a surge in its business lending division, which now accounts for almost 40% of the bank's total profits. The bank's interim dividend was also lifted by 20% to $2.10, fully franked.

CEO Matt Comyn, while remaining optimistic on the medium-term outlook, warned that global economic growth would slow in 2023 and business credit growth would moderate. The bank has targeted growth opportunities in the health and business services sectors, which helped boost the number of transaction accounts held by businesses. The bank also reported that 105,000 new accounts were opened in the second half.

However, rising interest rates have increased loan impairment expenses by AUD 586 million ($409 million), reflecting strong inflationary pressures and a decline in property prices. The slowdown in business credit growth is seen as a reflection of these headwinds facing the economy.

The bank's shares fell by as much as 5.7% in early trading in Sydney, amid concerns about the bank's mortgage business in the high interest rate environment and the bank's lending margins peaking. Despite the concerns, the bank remains optimistic about the Australian economy's chances of achieving a soft landing.

Movers and Shakers

✅Biggest Winners 

Cochlear Limited (ASX: COH) rose by 7.8% to $225.28 following the release of the company's half-year financial results. While Cochlear announced a reduction in its profit for the first half of the year, it continues to anticipate significant full-year profit growth due to the introduction of the Nucleus 8 Sound Processor and the ongoing recovery from COVID operation delays.

GUD Holdings (ASX: GUD) share price increased by 8.1% to $8.94 after reporting a 55.7% increase in revenue and an 88.7% increase in net income. GUD said that the rise was due to a combination of a strong core automotive performance and six-month contributions from APG and Vision X.

❌ Biggest Losers 

Treasury Wine Estates (ASX: TWE) share price fell more than 6.9% to $13.34. The wine industry behemoth reported an increase in EBITS of 17.2% and a half-year sales gain of 1.4%. This appeared to fall short of the markets expectations. Sales for Treasury Wine were 8% below consensus expectations, mostly because Premium Brands underperformed.

ANZ Group Holdings (ASX: ANZ) share price dropped by 3.8% closing at $24.78 after a market wide sell-off of banking stocks. ANZ announced today that it was issuing new additional Tier 1 capital security notes to raise $1 billion.

Crypto Corner

Credit Suisse leads a $65 million Series B financing for Taurus

In a Series B capital raising coordinated by Credit Suisse, Taurus, a provider of digital asset infrastructure for European financial institutions, has raised $65 million. Other institutional investors who took part in the investment round included Deutsche Bank, Pictet Group, Cedar Mundi Ventures, Arab Bank Switzerland, and Investis.

The funds raised, according to the announcement, will be put to use by Taurus to support its growth strategy in three key areas: securing the best engineering talent to continue developing its platform; growing its sales and customer success organization to improve its infrastructure solutions with new offices in Europe, the UAE, and later in the Americas and Southeast Asia; and finally, upholding the strictest security, risk, and compliance standards across product lines.

Over 25 financial institutions and business clients have joined forces with Taurus, and these agreements span eight nations and three continents. Financial institutions such Arab Bank Switzerland, CACEIS, Credit Suisse, Deutsche Bank, Pictet, Swissquote, and Vontobel are among Taurus' clients.

Economic Outlook

A busy week on the economic calendar with the US CPI read on Tuesday the big item investors will be watching with housing data the other key metrics. Australia reports employment figures on Thursday, with unemployment expected to come in at 3.5%

16th February

• US Retail Sales MoM (est. 1.6%)

• US Capacity Utilization (est. 79.1%)

• US Industrial Output (est. 0.5%)

• AU Employment (est. 20K)

• AU Unemployment (est. 3.5%)

17th February

• US Jobless Claims (est. 200k)

• US Housing Starts number (est. 1.36M)

• US Building Permits (est. 1.35M)

• US Producer Prices (est. 4.9%)

• US PPI Inflation (est. 5.4%)