With the end of the August 2015 reporting season quickly approaching, now's a perfect time to take a quick recap of the companies in the financial sector that have surprised to the upside and downside, and what you should do about it.
The sector as a whole was a little disappointing this year. There was a negative 7% return for the S&P/ASX 200 (INDEXASX: XJO) for the month and roughly the same amount of financial companies that performed better and worse than the mean.
3 Disappointing Financial Stocks
Genworth Mortgage Insurance Australia (ASX: GMA) shares plunged nearly 25% over the last 30 days as investors worried about the state of the local housing market and what impact restrictions on investor lending would have on the mortgage insurer. GMA reported a 25% fall in statutory profit, equal to $113 million, but a "steady"underlying profit of $132.9 million, down from $133.1 million in the prior corresponding period
Bendigo and Adelaide Bank Ltd (ASX: BEN) shareholders and management learned a valuable lesson this month; increase your dividend payment OR ELSE. In Bendigo's case, the ELSE turned out to be a massive 17% plunge in the share price when the group increased its dividend by only 2 cents versus the expected 3 cents. You've been warned.
Insurance Australia Group Ltd (ASX: IAG) shares fell an ugly 13% in August, driven by a disappointing full-year result where Insurance profit fell to $1.1 billion from $1.6 billion, underlying insurance margin slipped to 13.1% from 14.2%, and the full year dividend payment was reduced to 29 cents per share (cps) from 39 cps. Despite Warren Buffett investing in the company I'm avoiding it.
3 Quality Financial Stocks
In stark contrast to its peer above, QBE Insurance Group Ltd (ASX: QBE) had a reasonable month, delivering a half-year result that was ahead of expectations but tempered the prospect of it continuing at the current run rate for the full year. The shares traded in-line with the ASX 200 but could spurt higher again in the second half.
Medibank Private Ltd (ASX: MPL) shares surged 16% higher in August following the release of a bumper earnings report that quelled many fears around the company. The health insurer revealed a 3.2% lift in group revenue to $6.58 billion and a 13.3% lift in underlying net profit after tax (NPAT) to $285.3 million compared to the prior corresponding period (pcp). This result was well ahead of the $258.2 million forecast in the group's prospectus.
Magellan Financial Group Ltd (ASX: MFG) shares also had a huge month, beating the ASX 200 by around 12% following a bumper profit result. Funds under management (FUM) soared a staggering 55% to $36.4 billion, net profit leapt 110% to $174.3 million, while fully diluted earnings per share were up a corresponding 108% to 101.8 cents per share (cps).
