Major bank a big drag on ASX

The big four bank that has enjoyed a stellar share price performance in recent months was sold off, dragging down the ASX.

The Australian sharemarket fell for the second straight day, despite a positive lead from Wall St overnight, as a banking giant’s quarterly trading update triggered a sell-off of its stock.

The benchmark S&P/ASX200 index closed 0.68 per cent lower at 7369.9, while the All Ordinaries Index fell 0.56 per cent to 7704.

CommSec said nine out of 11 sectors finished in positive territory, but heavy losses by banks were the main weight dragging the market lower.

OMG chief executive Ivan Tchourilov said materials also had a rough trot on the back of softening commodity prices, with gold miners a big weight.

“The biggest laggard in the 200 Index today was also its largest, the Commonwealth Bank,” Mr Tchourilov said.

CBA shares slumped to $98.99 after weeks of trading well above $100, with the bank reporting a substantial drop in net interest margin.

Drivers included home loan price competition, switching to lower margin fixed rate loans and the continued impact of a low interest rate environment.

CBA shares were up nearly 40 per cent for the year, before losing 8 per cent on Wednesday, Mr Tchourilov said.

“Both expenses and income were flat for the quarter, still up 20 per cent when compared to the first quarter of last financial year,” he said.

“They have come in well below their average though, with investors choosing to walk.

“Banks have been under significant pressure since the royal commission into financial services and are still stripping down operations to adopt a more simplified model.

“The question remains whether they’ll be able to replicate the mammoth profits of the last few years.”

ANZ lost 2.04 per cent to $27.84, National Australia Bank backtracked 1.1 per cent to $28.91 and Westpac shed 1.67 per cent to $22.37.

Rio Tinto slid 0.98 per cent to $88.91, BHP shed 1.45 per cent to $35.96 and Fortescue lifted 1.89 per cent to $15.59.

Among the gold miners, Evolution dropped 2.9 per cent to $4.01, Newcrest declined 2.1 per cent to $24.66 and Northern Star slipped 1.34 per cent to $10.33.

CommSec said Nufarm was the worst performer, despite releasing a strong set of full-year profit numbers, with revenue up 10 per cent and EBITDA surging 51 per cent compared to the previous corresponding period.

It also declared a 4 cent dividend, the first shareholder payment since October 2018, but closed 8.57 per cent lower at $4.59.

Mosaic Brands, the fashion retailer behind chains including Rockmans, Rivers and Noni B, surged 6.4 per cent to 66.5 cents after holding its annual general meeting.

Investors heard 200,000 in-store only customers transitioned to also shop online throughout the year and in addition, about 200,000 new online-only customers were acquired.

Mosaic is expanding its online offering and pushing into new overseas markets.

“In the second half of this year we will be launching four of our brands into the US market and although this will be a slow burn, it will sow the seed for years to come,” chief executive Scott Evans said.

Afterpay also held its AGM and focused on pitching the value of its planned merger with US payments giant Square to shareholders, who will vote on the proposal on December 6.

The buy-now-pay-later market darling’s shares gained 2.09 per cent to $119.84.

CommSec noted both Seven West Media and Seek lost ground despite upgrading full-year guidance.

The media group weakened 3 per cent to 64.5 cents, while the online jobs site retreated 1.29 per cent to $35.28.

In economic news, the wage price index rose 0.6 per cent in the September quarter, “which should entice more workers back into the market and strengthen the economy,” Mr Tchourilov said.

“The one drawback will be added staffing costs shaving down profitability, as was noted in the Commonwealth Bank quarterly update today.”

The Aussie dollar was buying 72.92 US cents, 54.28 British pence and 64.5 Euro cents in afternoon trade.

Originally published as Second straight day of losses for Australian sharemarket, dragged down by banks, miners

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