ANZ Bank ((ANZ)) is the primary banker to the Platforms sector and provides similar arrangements to both Netwealth Group and HUB24 ((HUB)). The former announced the bank has provided 12 months’ notice to terminate the current pooled cash deposit arrangements.
While the termination is not unexpected to Morgans there is near term earnings uncertainty/risk until new arrangements are finalised and the delay in agreeing terms infers the bank is looking for a significant change in rate.
The broker factors in a -30 basis point (bps) reduction in the deposit rate for both platform groups. Every 10bps move impacts the analyst’s FY23 forecast EPS by around 4% for Netwealth. Hold rating and target falls to $15.40 from $16.20.
If the outcome is worse than expected Morgans believes the company can absorb the impact and still deliver substantial growth on a long-term view.
Sector: Diversified Financials.
Target price is $15.40.Current Price is $13.78. Difference: $1.62 – (brackets indicate current price is over target). If NWL meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges – negative figures indicate an expected loss).
