Australian Stock Market Report – Midday 5/5/14

Mid Session report 12:30 AEST

The ASX 200 has given up its early gains on Monday to be trading almost by 0.2% lower as investors focus on banking stocks.
Westpac (WBC) shares have fallen more than 1% after having initially risen by 0.8%. The bank reported first-half cash earnings rising by 8 per cent to $3.77 billion in the face of tighter margins. The result was 3 per cent above consensus expectations although the response similar to the better than expected ANZ result last week. WBC followed ANZ´s lead last week in posting a decline in margins due to competition for home loan customers. The market had anticipated that Westpac would increase its net interest margin, which reflects the difference between its cost of borrowing and the rates at which it lends to customers. This measure however fell eight basis points to 2.1 per cent. WBC lifted its fully-franked interim dividend to 90 cents, from 86 cents previously.

Elsewhere in the banking sector, Bendigo and Adelaide Bank (BEN) announced it will purchase the Victorian government´s agribusiness lender Rural Finance Corporation for $1.78 billion. The purchase will be partly funded with a $230 million institutional capital rising, which is expected to be completed by mid-July. BEN will acquire Rural Finance´s $1.695 billion loan book, along with its 11 offices across Victoria.

China´s Baosteel Group and Aurizon (AUR) have announced their intention to make a joint offer worth $3.40 a share for the shares in Aquila that they don´t currently own. Baosteel is one of China´s largest steelmakers and already owns 20% in Perth-based Aquila. AUR, whose operations are mostly in Queensland, is Australia´s largest hauler of coal. AQA shares were at $3.37 a rise of 37 per cent

According to the ABS, the number of Australian home building permits fell 3.5% in March. This was the fifth monthly fall in the past half year adding to concerns about the contribution housing construction will make to the economic recovery. Building approvals have risen by 20.0% in March compared to a year earlier. Permits to build houses fell 0.7% from a month earlier.

[Kick off your trading day with our newsletter]