Today, we’re looking at some of the best performing ASX financials shares of 2020. Financials shares have been some of the hardest-hit shares in 2020, thanks in large part to the coronavirus-induced recession.
Although sub-sectors within financials (ie. banking, insurance, asset management) are all affected in different ways by the prevailing economic conditions of the day, financials as a whole are viewed as a rather cyclical sector – meaning they tend to rise and fall in line with broader economic growth.
We won’t be looking at ASX bank shares, or those involved with buy now, pay later (BNPL) today. Even though these companies are technically financials, we will examine them separately to get a better grip on their individual eccentricities.
So, here are the top 5 ASX financials shares for 2020 so far:
|ASX Financial Share||YTD share price gain (as of 16 December)||Market Capitalisation|
|Netwealth Group Ltd (ASX: NWL)||101.91%||$3.78 billion|
|Hub24 Ltd (ASX: HUB)||80.54%||$1.34 billion|
|AUB Group Ltd (ASX: AUB)||41.73%||$1.27 billion|
|Pinnacle Investment Management Group Ltd (ASX: PNI)||34%||$1.18 billion|
|Janus Henderson Group plc (ASX: JHG)||21.17%||$8.83 billion*|
Wealth platforms top ASX financials sector
One theme that stands out from this list is the success of ‘investment services’ providers, namely Netwealth and Hub24.
These 2 companies both offer investment platforms for money management. Individuals and financial advisers can use these platforms to access all of their investments in one place, as well as providing other tools like superannuation and insurance management.
These companies have arguably benefitted from the 2018 banking royal commission, the aftermath of which saw many of the big four banks face criticism over questionable practises in relation to ‘vertically integrated’ wealth products. This likely damaged broader consumer confidence over having a big four bank managing customers’ wealth. Since then, many of the banks have divested their wealth management arms.
In fact, Hub24 pointed this out during its recent annual general meeting. The company’s chair Bruce Higgins stated the following on that matter:
This disruption [of the financial services industry], including the incumbents divesting of their wealth businesses, continues to create a significant opportunity for HUB24 to continue to grow.
That comment came after Hub24 reported revenue growth of 14% for FY2020, and earnings growth of 60%.
Likewise, back in August we saw Netwealth report earnings growth of 24.8% for FY2020. Both Netwealth and Hub24 have clearly been sitting in a healthy tailwind in 2020.
Fund managers close behind
We also see 2 fund managers in this list, Janus Henderson and Pinnacle.
Janus Henderson is an interesting one. This dual-listed company (hence the star on the table above) has had a solid, if not spectacular year. For the second quarter of 2020 (ending 30 June), the company reported revenues were down 7% compared to the first quarter (ending 31 March). However, the company also reported earnings per share (EPS) growth of 12% over the same period.
The company has been going on a buying spree over its own stock. It has been executing a US$200 million share buyback program over the course of 2020 . We covered how this program is likely behind much of the Janus share price gains in 2020 here.
Similarly, Pinnacle has been benefitting this year as well. Back in July, the company reported that it had raked in $25.8 million in performance fees for FY2020, which prompted its share price to surge more than 10% that day. It also reported EPS growth of 4.7% for FY2020 in August, as well as a 5.6% rise in net profits after tax.
Finally, we have financial insurance company AUB Group. AUB reported its strongest year on year growth results in 7 years back in August. The company experienced a 9.2% increase in revenue for FY2020, which helped push net profits after tax up by 15.2% for the year.
The company also managed to jack up its final dividend by 9.2% compared with FY19. It even upped its guidance for FY2021 on these numbers. No wonder investors were chasing this company’s shares up this year.