Over the past fortnight, we’ve seen continued market skepticism toward the banking sector. With global recession fears, some dubbing it a potential “Trumpcession”, we’ve witnessed a correction in bank share prices. Westpac is on track to hit Morgan Stanley’s bearish target of $29.20, while CBA has pulled back 5.5% in just one week. However, rather than focusing on short-term market moves, savvy investors should be looking at the long-term prospects of Australia’s major banks.
Now, with CBA and Westpac covered, let’s turn our attention to Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank (ASX: NAB).
ANZ: Diversified Strength, but Margin Pressures Ahead
ANZ’s biggest strength has always been its diversified operations, with a strong presence outside of traditional retail banking. The latest results reaffirmed this positioning:
Institutional banking saw impressive 13% loan growth, with corporate finance rising 6% in just the last quarter
Customer deposits increased 2% overall, with Suncorp’s newly acquired banking business growing at 5%.
The weaker Australian dollar provided a foreign exchange tailwind for the business.
However, ANZ’s growing pains have also surfaced:
Credit quality is worsening, with gross impaired assets rising to $1.90 billion, the highest level since 2021.
New Zealand operations saw home loan arrears spike by 75 basis points, in contrast to a slight improvement in Australia.
Net Interest Margins (NIMs) are under pressure, currently at 1.5% with expectations of further downside.
The bank’s CET1 capital ratio (a measure of financial strength) came in at 11.5%, slightly below market expectations. However, given the Suncorp acquisition and ongoing share buybacks, this was anticipated.
Final Verdict on ANZ
Strengths: Diversified operations, strong institutional banking, stable deposit growth. Weaknesses: NIM pressure, deteriorating loan quality in New Zealand.
NAB: A Turnaround Story Facing Headwinds
When we last covered NAB, it was positioned as a turnaround story, a bank attempting to navigate cost pressures and a high SME (small business) exposure. That story remains largely the same, but with additional hurdles.
For Q1, NAB reported:
Cash earnings of $1.74 billion, missing consensus estimates.
Net profit of $1.7 billion, down 2% from the previous quarter despite a 3% revenue increase.
Credit impairments rose to 1.43%, the highest level in two years, primarily from business lending stress.
While NAB’s SME focus has traditionally been an advantage, it’s now proving to be a double-edged sword. The bank is more vulnerable to:
Heightened deposit competition, leading to funding cost increases.
Higher impairments, as small businesses struggle with rising interest costs.
On the cost side, NAB is trying to rein in expenses:
The bank is targeting $400 million in productivity savings for FY25.
NAB expects operating expense growth to slow as efficiency measures kick in.
However, the market remains unconvinced. Shares fell 7% on results day, reflecting concerns about the balance sheet and the lack of a clear turnaround catalyst.
With all four major banks now reporting, here’s what we know:
CBA remains the most profitable and well-run, but trades at a steep premium. Investors should consider valuation risks before buying.
Westpac has struggled, but the market reaction may be overly harsh. A higher-risk proposition with potential long-term upside if execution improves.
ANZ offers a more balanced approach, benefiting from institutional strength and Suncorp’s integration. However, margin pressure is a risk.
NAB continues to face structural challenges, with higher impairments and funding costs weighing on sentiment.
Ultimately, CBA remains the best-managed bank but is priced accordingly. ANZ presents a reasonable alternative, while Westpac and NAB have more execution risks.
At TAMIM, we focus on businesses that are not only well-managed but also trading at attractive valuations. With interest rates shifting and macro uncertainties ahead, investors should remain selective when considering Australian bank stocks in 2025.
Disclaimer: Commonwealth Bank (ASX: CBA), NAB (ASX: NAB) and ANZ Bank (ASX: ANZ) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
The February 2025 earnings season has placed Coles (ASX: COL) and Woolworths (ASX: WOW) under the microscope, with both supermarket giants facing an evolving retail landscape. While Coles demonstrated strong execution and market share gains, Woolworths encountered cost pressures and operational disruptions that impacted profitability. However, despite their contrasting short-term results, both companies present compelling investment opportunities, each offering distinct risks and rewards for investors.
Coles: Strong Execution and Market Gains
Coles (ASX: COL) delivered a net profit after tax of A$576 million, maintaining stability in an economic environment where cost-of-living pressures have influenced consumer spending habits. The company’s supermarkets division achieved a 4.3% revenue increase, reflecting its ability to retain customers through value-driven promotions, digital transformation, and supply chain resilience. The decision to declare a 37 cents per share dividend, the highest in over five years, reinforces its commitment to shareholder returns.
Leveraging Supply Chain Strength and Market Share Gains
Coles successfully capitalised on Woolworths’ supply chain disruptions, which were impacted by industrial action, capturing an estimated $120 million in incremental sales. This underscores Coles’ ability to execute efficiently under pressure, reinforcing its reliability to Australian consumers. By strengthening its distribution networks and investing in automation, Coles has positioned itself as a more dependable option for both suppliers and customers during periods of market instability.
Digital Expansion Driving Future Growth
One of the key drivers of Coles’ ongoing growth has been its investment in digital retailing. The company reported a 22.6% rise in eCommerce sales, with a 55% increase in Coles App monthly active users. Innovations such as windowless Rapid Delivery and the full transition to automated customer fulfillment centers have streamlined its online order execution. As consumer demand for convenience continues to grow, Coles’ investment in digital and logistics infrastructure ensures it remains competitive in the fast-evolving grocery sector.
Margin Expansion and Cost Management Initiatives
Coles achieved an 88-basis-point increase in underlying gross margins, driven by operational efficiencies and AI-driven inventory management. The company’s ability to optimise stock availability and reduce markdown losses has strengthened profitability. However, cost pressures remain a risk, particularly as wage inflation and supply chain investments continue to weigh on operating expenses. The key challenge for Coles will be balancing its investments in long-term growth while maintaining short-term profitability.
Woolworths (ASX: WOW), despite reporting a 21% decline in net profit to $739 million, remains a dominant force in Australian retail with strong foundations for future growth. While the company faced short-term pressures from rising operational costs and supply chain disruptions, its leadership in digital innovation, eCommerce expansion, and customer engagement position it well for a rebound. Grocery sales grew by 2.7%, and its continued investment in convenience, loyalty programs, and supply chain improvements signal a commitment to long-term profitability. The company’s ability to navigate industry headwinds while maintaining its dominant market position highlights the resilience of its business model. With a $400 million cost-cutting initiative underway and ongoing enhancements to its supply chain efficiency, Woolworths is well-positioned to regain profitability as market conditions stabilise.
eCommerce and Digital Innovation as a Competitive Advantage
Woolworths continues to lead the industry in online sales, with eCommerce revenue reaching $4.7 billion, an 18.3% increase year-over-year. Its integration of MILKRUN and expanded on-demand delivery capabilities have positioned Woolworths at the forefront of digital grocery retailing. With 31% of online orders now being delivered within two hours, Woolworths is setting the industry standard for convenience, an area where Coles is still catching up. However, digital expansion comes at a cost, and Woolworths must ensure its online operations contribute positively to overall profitability.
Supply Chain Disruptions and Cost Challenges
One of the biggest setbacks for Woolworths this earnings season was the impact of industrial action, which resulted in $240 million in lost revenue and a $95 million EBIT hit. While these disruptions are temporary, they have exposed vulnerabilities in Woolworths’ supply chain resilience. Rising costs, including higher wages, increased logistics expenses, and elevated stock losses, have further pressured margins. In response, Woolworths has initiated a $400 million cost-cutting program aimed at streamlining operations and improving efficiency, though the full benefits may take time to materialise.
Changing Consumer Behavior and Competitive Pressures
Woolworths is also contending with a shift in consumer behavior. With household budgets tightening, more customers are cross-shopping between multiple supermarkets, leading to increased price sensitivity. This has forced Woolworths to invest heavily in discounting and promotional strategies, which have, in turn, compressed profit margins. While the company has taken steps to improve its value proposition, balancing competitive pricing with sustainable profitability remains a key challenge.
Investment Outlook: Two Different Paths to Growth
While Coles and Woolworths faced contrasting earnings results this season, both companies offer distinct investment opportunities. Coles currently appears stronger in execution, market share gains, and cost discipline, making it an attractive choice for investors seeking short-term stability. Woolworths, despite its earnings decline, retains strong long-term fundamentals, particularly in digital retailing, customer loyalty, and long-term growth strategies. If its cost-saving measures and operational improvements take effect, the company could regain profitability momentum.
For investors, the choice between Coles and Woolworths ultimately depends on individual risk tolerance and investment horizons. Coles offers a steadier trajectory with strong near-term execution, while Woolworths presents a potential turnaround opportunity for those willing to wait for operational improvements to take hold. A balanced portfolio approach could include both, capitalising on Coles’ resilience and Woolworths’ long-term upside.
A Quick Look at Other Retailers in the Sector
Beyond Coles and Woolworths, the February 2025 earnings season also provided insight into other key players in the retail sector. Harvey Norman (ASX: HVN) delivered a 39.7% profit increase, benefiting from AI-driven demand in consumer electronics, though its international expansion efforts faced setbacks. Super Retail Group (ASX: SUL), which owns brands such as Supercheap Auto, Rebel, and BCF, reported a 10% decline in profit due to rising operational costs and margin pressures. Wesfarmers (ASX: WES), despite shutting down its struggling online marketplace Catch, maintained stable performance, underscoring its ability to allocate capital effectively across its retail portfolio.
While the grocery sector remains a defensive investment, opportunities exist in discretionary retail, particularly for companies that are successfully leveraging digital transformation and cost efficiencies. At TAMIM, we continue to assess businesses based on their ability to generate sustainable cash flow, maintain competitive advantages, and navigate changing economic conditions. Coles and Woolworths both demonstrate resilience, with Coles currently positioned as the stronger performer in the short term, while Woolworths retains long-term upside potential through its leadership in digital innovation. For investors, the key decision lies in whether they prioritise immediate stability or are willing to back a longer-term recovery story.
The TAMIM Takeaway
Coles has reinforced its position as a stable, well-executed market leader, leveraging supply chain efficiency, digital expansion, and cost discipline to drive consistent growth. Woolworths, despite short-term challenges, remains a dominant force with strong eCommerce leadership and long-term recovery potential. For investors, Coles offers immediate stability, while Woolworths presents an opportunity for future upside. A balanced approach may provide the best exposure to Australia’s resilient supermarket sector. Execution, adaptability, and pricing power will remain the key differentiators for success in the evolving retail landscape.
Disclaimer: Coles Group Ltd (ASX: COL), Woolworths Group Ltd (ASX: WOW) and Wesfarmers (ASX: WES) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
This week’s TAMIM Reading List unpacks the shifting landscapes of health, technology, and geopolitics. Denmark’s Ozempic and Wegovy boom is reshaping everything from diets to infrastructure, while Microsoft’s quantum computing breakthrough could redefine what’s possible. As voters’ perceptions of the economy challenge the data, we explore whether the West has lost the war it once thought was won. Palmer Luckey emerges as a modern industrialist, and the accuracy of time itself is up for debate. Meanwhile, Gen Z’s reluctance to leave home raises social questions, air travel safety is under scrutiny, and Germany faces deepening economic dilemmas. Finally, take a moment to appreciate the breathtaking winners of the 2025 World Nature Photography Awards.
ClearView (ASX: CVW) has long been a business with strong fundamentals, yet its stock has remained undervalued in recent times. Now, with the worst of its claims experience behind it, earnings stabilising, and a bold share buyback program in place, the company is taking active steps to close the gap between its market price and intrinsic value.
At a time when life insurers are becoming more attractive due to potential interest rate cuts, ClearView is positioned to benefit from a rebound in margins, an expansion in embedded value, and potential corporate interest. With a discount to embedded value exceeding 45% and a valuation multiple of just 6.2x forecasted FY26 earnings, the company is trading at levels that sophisticated investors should be watching closely.
The 1H FY25 results reflect a company in transition. While a temporary spike in claims impacted the first quarter, the sharp recovery in Q2 profitability suggests this was an anomaly rather than a trend. Management has moved quickly to reprice policies, improve claims oversight, and refocus the business, ensuring that growth and earnings trajectory remain intact. Now, with an aggressive share buyback in play, strong premium growth, and a renewed focus on profitability, the stock’s risk-reward profile looks increasingly attractive.
Balance Sheet & Capital Management: Closing the Valuation Gap
ClearView’s net assets stand at $363 million, or 55.1 cents per share, yet the stock continues to trade at around 44 cents, representing a 20% discount to net asset value. The company’s embedded value per share has also increased by 9.5% to 80.7 cents, yet the market still applies an astonishing 45% discount to this figure.
Management is now taking action to close this valuation gap. Instead of paying a dividend, ClearView has announced a share buyback of up to 10% of issued capital, reflecting its confidence in the underlying business and the attractiveness of repurchasing shares at current depressed levels. This move is particularly compelling given that life insurance businesses typically become more valuable in a falling interest rate environment, where their embedded value rises as discount rates decline.
Additionally, the company maintains $7 million in surplus capital, giving it financial flexibility to execute its growth initiatives while rewarding shareholders through capital allocation. The real question now is whether the buyback will be fully executed or deployed opportunistically, either way, it represents a clear signal that management sees significant upside potential in the stock.
1H FY25 Financial Performance: A Recovery in Motion
ClearView continues to strengthen its market position, with its advice in-force premium market share holding at 3.8% ($356 million) and gross premium growth increasing by 8% to $191.4 million. New business market share sits at 10.6%, with new business revenue at $16.3 million, down 8% year-over-year, a decline that appears more cyclical than structural.
The first half of FY25 was defined by a short-term hit to profitability. Life Insurance Underlying NPAT dropped 22% to $15.2 million, largely due to a $6.2 million claims loss in Q1. However, the rebound in Q2 earnings confirms that claims experience has normalised.
NPAT in Q1 stood at $4.2 million, but by Q2, it had recovered to $11.0 million, restoring profitability to historical trends. While group Underlying NPAT fell 28% to $12.5 million, this was expected given the Q1 impact. Importantly, management has already taken steps to prevent a repeat of these claims losses, implementing repricing, improved claims management, and retention measures. These proactive adjustments should ensure stabilised margins going forward.
Claims Losses: A Temporary Setback, Not a Structural Weakness
The Q1 claims spike, while impactful, does not appear to be a long-term issue. The Q2 claims ratio normalised, indicating that the worst of the volatility has passed. ClearView has the ability to reprice policies when needed, giving it the flexibility to restore profit margins if claims experience deviates from expectations.
(Source: ClearView FY25 Half Year Results Presentation)
The company has already repriced products, strengthened claims oversight, and reinforced customer retention strategies to ensure margin protection. These measures provide a much-needed safety net, allowing the business to remain resilient against unexpected fluctuations in claims experience.
Outlook: The Stage Is Set for Higher Margins & Growth
Looking ahead, ClearView is on track for a much stronger second half, with multiple tailwinds in place to support earnings recovery and stock re-rating.
Premium rate increases are set to take effect from February 2025, aligning with higher reinsurance costs and adjusted risk assumptions. This ensures long-term sustainability in underwriting profitability, protecting margins as the business scales.
For FY25, gross premium revenue is forecast to reach $395 – $400 million, supported by stable policyholder retention and premium growth. Management expects Life Insurance NPAT margins to improve to 9-10% for the full year, with a further expansion to 10-12% in the second half.
ClearView’s technology transformation project remains on schedule for completion in 1H FY26, unlocking operational efficiencies and cost savings. Additionally, the planned exit from wealth management by June 2025 will allow the company to fully focus on its core life insurance business, eliminating a loss-making segment and streamlining operations.
(Source: ClearView FY25 Half Year Results Presentation)
With FY25 Group Underlying NPAT expected to come in at $32.5 million, ClearView remains undervalued at a PE ratio of 8.9x, a discount that does not accurately reflect its improving earnings trajectory.
FY26 Targets: A Major Growth Inflection Point
Looking further ahead, ClearView has upgraded its FY26 gross premium target to $440 million, up from the previous $400 million forecast. The company’s new business market share target remains 12-14%, while Life Insurance NPAT margins are expected to expand to 11-13%.
At the midpoint, this translates to FY26 Life Insurance NPAT of $52.8 million and Group NPAT of $46.8 million, putting ClearView on an exceptionally attractive PE ratio of just 6.2x.
With the business tracking ahead of expectations, management is growing increasingly confident in its ability to deliver stronger margins, higher earnings, and long-term value creation.
The TAMIM Takeaway
ClearView is at a critical inflection point. The temporary earnings weakness in Q1 has been addressed, claims experience has returned to trend, and earnings power is rebounding. The company is making the right moves to unlock shareholder value, and if FY26 targets are met, the stock could easily re-rate toward a fair value of 70-80 cents per share within the next 6-12 months.
Life insurers also tend to perform well in a declining interest rate environment, as lower rates boost embedded value. This macro tailwind, combined with ClearView’s aggressive share buyback, improved margins, and operational focus, makes the risk-reward profile highly compelling at current levels.
Furthermore, with ongoing consolidation in the industry, ClearView remains a prime takeover candidate, offering strong market positioning, scalable earnings, and significant upside for a strategic buyer.
The key factors to watch will be buyback execution, margin expansion, and continued earnings momentum, all of which could act as catalysts for a substantial re-rating in ClearView’s valuation.
For investors looking for a turnaround story with a clear upside path, ClearView is one to watch.
Warren Buffett’s annual letter to Berkshire Hathaway shareholders is one of the most anticipated events in the investment world. Every year, investors both seasoned professionals and beginners, pour over his words to extract wisdom from one of the greatest investors of all time.
This year’s letter was no exception. While Buffett shared impressive results, record operating earnings, a growing cash pile, and strong performance from Berkshire’s insurance businesses there were also critical insights for investors looking to refine their own approach to markets.
Here are two key investment lessons from Buffett’s latest annual report that are as relevant today as they have ever been.
1. Invest in High-Quality Businesses, Not Just Cheap Stocks
Buffett is known for being a value investor, but his latest report reinforces an important point: not all cheap stocks are good investments, and not all expensive stocks are bad ones.
One example of this philosophy in action is Berkshire’s investment in Apple. Even though Apple isn’t traditionally considered a “value stock” by classic metrics, Buffett has held onto it because of its high-quality business model, brand strength, and pricing power.
Why This Matters to Investors
Many investors make the mistake of focusing only on valuation metrics like the price-to-earnings (P/E) ratio or the price-to-book (P/B) ratio. While valuation is important, Buffett prioritises a company’s business quality first.
Does the company have a durable competitive advantage (what Buffett calls a “moat”)?
Is it generating consistent cash flow and strong returns on equity?
Does it have a strong management team that is aligned with shareholders?
Buffett is willing to pay a reasonable price for a great business rather than buying an average company at a bargain price. This shift in thinking has been critical to Berkshire’s long-term success.
How to Apply This Lesson
Focus on business quality first before looking at valuation.
Look for companies with strong pricing power, customer loyalty, and consistent earnings growth.
Avoid low-quality stocks just because they seem cheap – cheap stocks can stay cheap for a long time or even go to zero.
2. The Best Investors Think Long-Term
One of the most striking themes in Buffett’s annual report is his long-term perspective. While many market participants are obsessed with short-term earnings reports, daily stock price movements, or the latest macroeconomic trends, Buffett remains focused on the big picture.
Why This Matters to Investors
In an era dominated by algorithmic trading, speculative investing, and a constant flow of news, it’s easy to get distracted. Many investors panic during short-term volatility or sell out of great businesses due to temporary headwinds.
But Buffett plays the long game. He doesn’t buy stocks expecting to make a quick profit, he buys businesses with the intention of holding them for decades. This approach has led to massive wealth accumulation for Berkshire shareholders.
For example, when Buffett first invested in Coca-Cola in the late 1980s, many analysts questioned the valuation. Fast forward 30+ years, and the investment has paid off tremendously, generating billions in dividends and capital appreciation.
How to Apply This Lesson
Shift your mindset from short-term trading to long-term investing.
Be patient, great businesses compound wealth over decades, not months.
Don’t let market volatility shake you out of your investments. Volatility is normal, and the best businesses tend to recover and thrive over time.
The Tamim Takeaway
At Tamim, we adhere to these same principles in our investment approach. We prioritise strong businesses with durable competitive advantages, rather than chasing short-term speculative plays. Most importantly, we invest with a long-term horizon, allowing compounding to work in our favor.
Buffett’s annual letter serves as a powerful reminder of the fundamentals that underpin sustainable investment success. While markets will always fluctuate, the principles of patience, discipline, and quality investing remain timeless. At Tamim, we continue to apply these lessons to build resilient, high-performing portfolios for our investors.
Coles (ASX: COL) delivered a net profit after tax of A$576 million, maintaining stability in an economic environment where cost-of-living pressures have influenced consumer spending habits. The company’s supermarkets division achieved a 4.3% revenue increase, reflecting its ability to retain customers through value-driven promotions, digital transformation, and supply chain resilience. The decision to declare a 37 cents per share dividend, the highest in over five years, reinforces its commitment to shareholder returns.
Woolworths (ASX: WOW), despite reporting a 21% decline in net profit to $739 million, remains a dominant force in Australian retail with strong foundations for future growth. While the company faced short-term pressures from rising operational costs and supply chain disruptions, its leadership in digital innovation, eCommerce expansion, and customer engagement position it well for a rebound. Grocery sales grew by 2.7%, and its continued investment in convenience, loyalty programs, and supply chain improvements signal a commitment to long-term profitability. The company’s ability to navigate industry headwinds while maintaining its dominant market position highlights the resilience of its business model. With a $400 million cost-cutting initiative underway and ongoing enhancements to its supply chain efficiency, Woolworths is well-positioned to regain profitability as market conditions stabilise.
