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26 Mar 2025

Market Correction Over? A Deep Dive Into CBA, CSL, BHP, NAB & More

In this article, we’re going to share our thoughts on where the Aussie stock market is heading and take a deeper dive into five stocks from the top 10 large caps on the ASX. With the market recently experiencing a correction, it’s the perfect time to reassess your position and decide how to approach the next phase. There’s a lot going on right now, interest rate expectations are shifting, global economic factors are in play, and commodity-driven growth is providing some upside. We’ll break down how these elements are influencing the market and look at which sectors and stocks are likely to benefit. By reviewing these five major stocks, we aim to give you a clearer picture of where the opportunities might be, helping you navigate the current landscape and make smarter investment decisions going forward.

In this article, we’re going to share our thoughts on where the Aussie stock market is heading and take a deeper dive into five stocks from the top 10 large caps on the ASX. With the market recently experiencing a correction, it’s the perfect time to reassess your position and decide how to approach the next phase. There’s a lot going on right now, interest rate expectations are shifting, global economic factors are in play, and commodity-driven growth is providing some upside. We’ll break down how these elements are influencing the market and look at which sectors and stocks are likely to benefit. By reviewing these five major stocks, we aim to give you a clearer picture of where the opportunities might be, helping you navigate the current landscape and make smarter investment decisions going forward. Assessing the Reserve Bank of Australia’s Interest Rate Decision and Its Potential Market Implications Right now, the biggest question in the Australian market is whether the Reserve Bank of Australia (RBA) will cut interest rates in May. Market participants are betting there’s a 78% chance of a 25-basis-point cut, led by softening economic data—unemployment has ticked up to 4.1%, and inflation is easing, with the trimmed mean at 3.2% in Q4 2024. While this sets the stage for a rate cut, the RBA is keeping its cards close, saying it needs “clear, sustained” signs that inflation is under control before making a move. Source: (1) Trading Economics (2025) If the RBA does cut, we expect financials and real estate investment trusts (REITs) to benefit, as lower borrowing costs should boost lending activity and property values. However, history has shown that rate cuts don’t always guarantee an immediate market rally, sometimes they signal deeper economic concerns. That’s something we’ll be watching closely. Examining the Influence of the U.S. Federal Reserve’s Monetary Policy on Australian Equities and Currency The U.S. Federal Reserve is also playing a big role in shaping market sentiment here. By holding rates steady but hinting at possible cuts later this year, the Fed has injected some optimism into global markets, including Australia. A dovish Fed typically weakens the U.S. dollar, which can strengthen the Aussie dollar, a mixed bag for our economy. A stronger AUD makes imports cheaper and eases inflation, but it also makes Australian exports less competitive, which could put pressure on our resource companies. If U.S. inflation remains sticky and the Fed holds off on rate cuts, we could see renewed volatility in global markets, which would spill over into the ASX as well. Evaluating China’s 2.3 trillion Yuan Economic Stimulus and Its Ripple Effect on Australian Resource Stocks China’s latest 2.3 trillion-yuan economic stimulus package has given the Australian resources sector a much-needed boost. China is a key consumer of our iron ore, coal, and lithium, so any infrastructure push there tends to benefit mining giants like BHP, Rio Tinto, and Fortescue Metals. Source: (2) CNBS, TD Economics (2025) While the market has reacted positively, we’re keeping a close eye on whether this stimulus translates into sustained demand. China’s property sector remains a weak spot, and if growth stalls despite the government’s efforts, the recent rally in resource stocks could lose momentum. For now, we see this as a bullish catalyst for mining, but one that requires continued monitoring. Understanding Gold’s Surge Past USD 3,000 Per Ounce and Its Implications for Australian Investors Gold has been one of the standout performers this year, breaking above USD 3,000 per ounce. This reflects investor anxiety, whether it’s inflation concerns, geopolitical risks, or market volatility, gold has once again become a go-to safe-haven asset. Source: (3) Spot Gold USD (2025) This has been great news for Australian gold miners like Newcrest and Evolution Mining, which have outperformed the broader market. We still see room for upside, especially if central banks move toward rate cuts, which would lower the opportunity cost of holding gold. However, if inflation proves to be stubborn and rates stay higher for longer, we could see some short-term volatility in gold prices. Meanwhile, The Australian Dollar (AUD) has had a rough ride, with U.S. tariffs, global trade concerns, and shifting investor sentiment all playing a role. The US slapped a 10% tariff on Chinese imports, sparking concerns about China’s economic outlook. Since Australia’s economy is so closely tied to China, especially through commodity exports, this hasn’t been great news for the AUD. The uncertainty has made investors more risk-averse, pushing money away from AUD and into safer options. With all this uncertainty, investors have been piling into the U.S. Dollar (USD), which is seen as a “safe haven”. This shift has put more pressure on the Aussie dollar, making it harder for the currency to gain ground. Plus, with investors flocking to U.S. Treasuries, demand for our currency has taken a hit. China just reported weaker-than-expected inflation numbers, which has raised concerns about a slowdown. Since China is Australia’s biggest trade partner, any sign of trouble there tends to drag the AUD down. If demand for Australian exports softens, the currency could struggle to find support. Closer to home, Australia’s labour market hasn’t been looking too strong. Job numbers came in weaker than expected, making market participants wonder if the Reserve Bank of Australia (RBA) will consider cutting interest rates. So far, the RBA is taking a cautious approach, but if the economy continues to slow, we could see some shifts in policy that affect the AUD. Source: (4) AUD/USD spot (2025) Since Australia is a major commodity exporter, the AUD is highly sensitive to what’s happening with iron ore, coal, and natural gas prices. When commodity prices rise, the AUD tends to follow. But with concerns over China and global trade tensions, we’re seeing some pressure on key exports, and that’s weighing on our currency. For now, market sentiment remains cautious. If trade tensions drag on and China’s economic outlook doesn’t improve, the AUD could stay under pressure. On the flip side, if commodity prices rebound or the RBA holds firm on rates, the currency might find some stability. Assessing the Performance of the ASX 200 and the Sectors Leading or Lagging in 2025 The ASX 200 has shown some resilience despite all the uncertainty, bouncing back in recent weeks. However, it’s still down year-to-date, reflecting broader concerns around economic growth and monetary policy. Looking ahead, we expect resource stocks to continue benefiting from China’s stimulus-driven demand, while rate-sensitive sectors like financials and REITs could gain traction if the RBA starts cutting. Consumer stocks, on the other hand, could remain under pressure as households grapple with cost-of-living challenges and higher mortgage repayments. Tech stocks, which have struggled in the higher-rate environment, could stage a comeback if borrowing costs come down. That said, this sector remains highly sensitive to global macro trends, so we’re watching US economic data and Fed policy decisions closely. Strategizing Our Market Positioning for 2025 by Balancing Opportunities and Risks We’re maintaining a selective approach given the current landscape. Our focus remains on resource stocks, especially those benefiting from China’s economic recovery. Additionally, we view gold miners as a reliable hedge in these uncertain times. This strategy has helped us outperform the ASX 200 over the past twelve months. Despite the recent broad market correction, our combined growth, income, and mining portfolio has delivered an 11.29% return over the same period. Financials and REITs could see a lift from lower rates, so we’re watching for buying opportunities there. However, we remain cautious on consumer-facing stocks, where spending power remains constrained. Source: (5) Investor Pulse, Aggregated Portfolio Performance vs. ASX200 (2025) The key risks to our outlook include a potential inflation rebound, shifts in global central bank policy, and unexpected geopolitical developments. While there are plenty of opportunities in this market, we believe staying flexible and diversified will be crucial in navigating what’s ahead. Right now, the Aussie market is in a transition phase. There’s optimism around interest rate cuts and China’s stimulus, but also plenty of uncertainty about inflation, global policy shifts, and economic growth. For now, we’re keeping a balanced approach, leaning into areas with strong tailwinds but staying mindful of risks. As always, we’ll be keeping a close watch on the data and adjusting our positioning as the market evolves. That said, the Australian stock market is in a bit of a mixed bag right now, with challenges and opportunities both playing a part in shaping the landscape. To navigate this environment, it’s important to understand the key factors at play, like interest rate changes, global economic trends, and the continued strength in commodities. By focusing on stocks with solid fundamentals and resilience to global shifts, there’s definitely potential for growth even amid some uncertainty. As we work through this market correction, it’s crucial to be strategic in your stock picks . So, let’s dive into five of the Top 10 large caps on the ASX and review them—this way, you’ll know whether you should hold, buy more, or even sell. Commonwealth Bank of Australia (ASX: CBA) We’re maintaining a hold rating on Commonwealth Bank of Australia (CBA) for the time being. Despite the bank’s solid earnings growth and a strong balance sheet, its current stock price is above our fair value estimate of $120 per share, suggesting that it is somewhat overvalued at this point. Although CBA has shown resilience, with the potential for consolidation between $130 and $151 per share, we see limited immediate upside unless macroeconomic conditions improve. Over time, however, the stock could rebound and approach the $166 per share level, depending on how the broader economic landscape and the market perform. Valuation Premium: Stock Trading Above Fair Value Despite Solid Earnings Growth CBA has certainly delivered on earnings, reporting a 2% year-over-year increase in NPAT, reaching $5.13 billion for the first half of FY25. This increase was driven by strong loan growth and a reduction in loan impairment expenses, all of which reflect CBA’s healthy operating environment. On top of this, the bank raised its interim dividend by 5% to $2.25 per share, fully franked, showing its commitment to returning value to shareholders. Net interest margin (NIM) also improved slightly by 2 basis points to 2.08%, indicating the bank’s ability to keep funding costs under control while maintaining solid profitability. However, the bank’s valuation is a key concern. CBA is trading at a P/E ratio of 25x, which is much higher than its domestic peers like ANZ (13.5x), NAB (14.5x), and Westpac (16x). Given this premium, the stock appears to be overvalued, especially when considering the potential risks in the broader economic environment. Our fair value estimate of $120 per share suggests there’s limited upside at current levels. Unless there’s a significant shift in market conditions, CBA’s stock could struggle to move higher in the near term. Strong Balance Sheet and Conservative Risk Management, but Potential Risks from Rising Loan Impairments and Market Pressures CBA’s balance sheet remains strong, with a solid capital position and conservative risk management strategies. The bank has reduced its loan impairment expenses by 23% year-over-year, indicating stable asset quality despite some of the pressures consumers are facing in the current economic environment. CBA’s surplus capital gives it flexibility to navigate potential risks while still maintaining a dividend payout ratio of 73% of cash NPAT. That said, there are still potential risks to consider. Higher funding costs, combined with margin compression, could weigh on the bank’s profitability moving forward, particularly if economic conditions worsen. Although CBA has done well in managing its loan impairment expenses so far, there’s always the risk that rising impairments could hurt future earnings, especially if consumer credit quality begins to deteriorate due to ongoing economic pressures. Macroeconomic Challenges and Competitive Pressures Could Limit CBA’s Ability to Grow Earnings in the Near Term The Australian banking sector remains highly competitive, and CBA is no exception. Slower credit growth, heightened competition, and rising funding costs are key factors that could weigh on the bank’s ability to grow its earnings in the near future. Additionally, the ongoing cost-of-living pressures on consumers and the potential for higher interest rates could continue to dampen demand for loans. If consumer spending weakens further, the bank’s loan growth prospects could be hindered, which would negatively affect earnings. Beyond this, there are also broader macroeconomic risks to keep in mind, including inflationary pressures, geopolitical uncertainties, and the possibility of rising loan impairments as the economic situation evolves. The performance of the broader market will play a crucial role in determining how CBA fares in the coming quarters. If these challenges persist or worsen, they could act as headwinds for the bank’s growth. However, if the economic environment stabilizes, CBA might see a rebound in its performance. Overall, while CBA continues to perform well financially, its overvaluation remains a significant concern. We’re sticking with a hold rating because of the current valuation premium, which makes the stock less attractive in the short term. CBA’s earnings resilience and strong balance sheet are encouraging, but given the current market conditions, we believe the stock will likely consolidate in the $130 – $151 range until macroeconomic factors improve. Looking further ahead, if economic conditions stabilize and market sentiment shifts, CBA could potentially see a rebound toward its $166 per share target. BHP Group Ltd (ASX: BHP) BHP’s recent half-year results showed strong operational performance, with safe, reliable operations, and a focus on cost discipline. The company reported industry-leading margins and solid cash flow, enabling it to declare a generous dividend of $2.5 billion. Moreover, investments in growth, such as $3.2 billion in potash and copper, and the formation of the Vicuña Corp joint venture, further demonstrated BHP’s commitment to long-term value creation. However, despite these positive aspects, the company experienced a decline in revenue, down $2 billion, primarily due to weaker iron ore and steelmaking coal prices. This decline weighed heavily on overall financial performance, with a significant 11% decrease in EBITDA. Rising Debt and Slower Cash Flow Generation: A Potential Red Flag for Investors Despite its free cash flow of $2.6 billion, BHP’s net debt rose by $2.7 billion during the period, reflecting an increase in obligations like dividend payments and settlement obligations from the Samarco disaster. While the company remains committed to its disciplined capital allocation framework (CAF), the rise in debt and the anticipated increase in net debt for FY25 could raise concerns among investors about BHP’s financial flexibility. Although the company has a strong balance sheet, its growing debt load could create challenges if commodity prices remain volatile or global economic conditions worsen. Economic Uncertainty: Global Growth Outlook and Commodity Demand Remain Mixed On the macroeconomic front, there are clear signs of uncertainty that could affect BHP’s growth prospects. While China’s economy is showing signs of recovery, the overall global growth forecast remains tepid, particularly in developed economies where sluggish industrial activity persists. Despite China’s stimulus efforts and infrastructure investment, demand for BHP’s key commodities, such as iron ore and steelmaking coal, remains weak in many parts of the world. Meanwhile, potential trade tensions and policy uncertainties add to the complexity of navigating future demand dynamics. In this environment, we expect some volatility in commodity prices, which could pose risks for BHP’s revenue and profit generation. Inflation and Cost Pressures: Long-Term Concerns About Profitability Although inflation has eased from its post-pandemic highs, BHP continues to face pressures on its cost base. While wage growth has moderated in some regions, higher costs for raw materials and electricity, along with the lingering effects of inflation on labour, could weigh on future profitability. Given that production costs are still higher than pre-pandemic levels, BHP may find it difficult to maintain margins if commodity prices fail to recover or if operational challenges persist in key markets like Australia and Chile. This inflationary environment adds another layer of risk to BHP’s long-term cost management. Mixed Outlook for Key Commodities: Copper Demand Faces Challenges As one of BHP’s core commodities, copper has had a mixed outlook recently. While copper prices remained relatively elevated due to China’s stimulus plans and demand from the renewable energy and electric vehicle sectors, prices have retreated from recent peaks, reflecting broader commodity market volatility. While China’s demand for copper is expected to continue growing, external factors such as soft manufacturing demand in other regions and challenges in global supply could create headwinds for copper prices. Additionally, the cost curve for future copper mines is likely to steepen, meaning higher prices will be needed to incentivize new investment. As a result, any disruptions in supply or slow growth in demand could negatively impact BHP’s copper business, which is increasingly central to its earnings mix. While BHP remains a strong, resilient company with a solid dividend track record, we believe that the combination of rising debt, economic uncertainty, inflationary pressures, and mixed commodity outlooks creates a risk of further downside in its stock price. Despite our estimation that its fair value is close to its current market price of $40 per share, the broader market risks and specific challenges facing BHP in the near term suggest that it may be better to take a step back for now. We recommend selling BHP, but we’ll continue monitoring the market for opportunities to re-enter at a more favourable time. CSL Ltd (ASX: CSL) CSL Limited (ASX: CSL), the biotechnology company, has shown strong growth and potential across its various segments, which include rare and serious diseases, influenza vaccines, and iron deficiency therapies. Despite its solid fundamentals, CSL’s share price has not fully reflected this strength due to broader market pressures. Given the current market environment, we are advising a “hold” for CSL at this time, estimating a fair value of $301 per share, though we anticipate consolidation around $250 per share in the near to medium term. Solid Revenue and Profit Growth, Despite Market Challenges For the first half of FY25, CSL reported impressive financial results. The company posted a total revenue of $8.48 billion, reflecting a 5% increase at constant currency compared to the same period last year. Net profit after tax (NPAT) came in at $2.01 billion, marking a 7% increase on a constant currency basis. Additionally, NPATA (Net Profit After Tax and Amortization) stood at $2.07 billion, up 3% year-over-year, with earnings per share increasing by 3% to $4.29, and 4% when adjusted for constant currency. The company declared an interim dividend of $1.30 per share (approximately AUD 2.08), representing a 16% increase from the previous year. Strong Performance from CSL Behring, Leading to Growth in Core Segments CSL Behring, the company’s largest business segment, delivered strong results with total revenue of $5.74 billion, up 10% at constant currency. The Immunoglobulin (Ig) product line was a key contributor, with sales rising 15% to $3.17 billion, driven by strong demand for PRIVIGEN and HIZENTRA. Haemophilia products also performed well, bringing in $731 million, an 11% increase, with growth in IDELVION and HEMGENIX, CSL’s gene therapy for haemophilia B. Despite this strong performance, CSL’s influenza vaccine business, CSL Seqirus, faced some challenges due to a low rate of influenza vaccinations, particularly in the United States. CSL Seqirus Faces Headwinds from Low Influenza Vaccination Rates CSL Seqirus, CSL’s influenza vaccine division, reported a 9% decline in revenue at constant currency, with total sales dropping to $1.66 billion. Low immunization rates, especially in the U.S., impacted the sales of FLUAD and FLUCELVAX vaccines, which were down 17% and 12%, respectively. While this segment’s performance has been weaker, CSL Seqirus remains a critical player in the global influenza vaccine market, with growth potential driven by its pre-pandemic preparedness strategy, including the award of several tenders for the current H5 Zoonotic (avian bird flu) outbreak. CSL Vifor Continues to Show Strong Growth in Iron Deficiency and Nephrology CSL Vifor, focusing on iron deficiency and nephrology treatments, reported revenue of $1.08 billion, up 6% at constant currency. Iron product sales rose 3%, driven by continued volume growth in Europe despite generic competition. The nephrology portfolio also performed well, with TAVNEOS showing strong growth across markets and FILSPARI exceeding expectations in Germany, Austria, and Switzerland. These segments continue to demonstrate their value, contributing significantly to CSL’s diversified revenue stream. Financial Strength and Cash Flow Position CSL for Long-Term Growth CSL’s financial position remains robust, with cash flow from operations increasing by 18% to $1.26 billion. This was driven by strong earnings growth and effective working capital management. The company’s balance sheet is in a strong position, with net assets of $20.55 billion. Capital expenditures decreased to $366 million due to lower investment spending, while proceeds from business disposals also contributed to CSL’s solid financial standing. Outlook for CSL: Navigating Challenges with a Focus on Long-Term Growth Looking ahead, CSL has reaffirmed its guidance for FY25, projecting revenue growth of 5-7% at constant currency. The company anticipates NPATA for FY25 to be in the range of $3.2 billion to $3.3 billion, representing a growth of 10-13% over FY24. CSL remains focused on improving gross margins, particularly through the completion of the RIKA plasmapheresis device roll-out by June 2025. Despite the challenges faced by CSL Seqirus, the company is optimistic about growing market share in influenza vaccines due to its differentiated strategy. Furthermore, the strong growth prospects in iron deficiency and nephrology, driven by CSL Vifor, provide a solid foundation for future earnings. Recommendation: Hold CSL Amidst Market Pressures, With Potential for Long-Term Growth CSL’s core business units are performing well, particularly CSL Behring, which continues to be a major growth driver for the company. CSL Vifor’s success in the iron deficiency and nephrology markets further supports the company’s solid outlook. However, the performance of CSL Seqirus in the influenza vaccine segment has faced challenges, and broader market pressures continue to weigh on CSL’s stock price. Given the company’s strong fundamentals, we estimate CSL’s fair value is $301 per share, but near-term consolidation around $250 per share is likely. As such, we advise a “hold” on CSL at present, with potential for significant upside once market conditions stabilize. Westpac Banking Corp (ASX: WBC) We view Westpac (ASX: WBC) as a “buy” right now, with strong upside potential despite estimating its fair value at $32 per share. Despite this valuation, we believe the stock presents an attractive investment opportunity, especially as the broader market stabilizes and the stock could potentially rebound in the near term. In its first quarter 2025 update, Westpac reported a net profit of $1.7 billion, down 9% compared to the second half 2024 quarterly average, mainly due to Notable Items related to hedge accounting, which will reverse over time. Excluding these Notable Items, unaudited net profit increased 3% to $1.9 billion. This shows strong underlying growth despite external challenges. Pre-provision profit also grew by 3%, with revenue rising 2% and expenses increasing by just 1%. These figures point to good financial resilience and solid performance, even in a volatile environment. Strong Operational Momentum with Impressive Loan and Deposit Growth Westpac achieved a strong $14.4 billion increase in customer deposits during the quarter, with loan growth of $13.4 billion. Specifically, Australian housing loans (excluding RAMS) grew by 2%, business loans increased by 3%, and institutional loans were up by 6%. These strong growth figures demonstrate the bank’s ability to attract customers and generate new business, particularly in areas like housing and institutional lending. Westpac continues to enhance its customer service offerings. The bank is adding 200 new small business and SME bankers across Australia by 2027, and it has rolled out digital financial management tools for businesses to track cash flow and reconcile expenses. Additionally, WBC has launched new offset accounts, giving customers greater flexibility, and implemented initiatives like the ability to transfer credit card reward points to Everyday Rewards points. The bank has also been reappointed as the primary banking partner for the New South Wales Government, reinforcing its position as a key player in the public sector. These efforts further strengthen WBC’s customer base and market position. Westpac’s financial strength remains impressive. As of December 31, 2024, the bank reported a CET1 capital ratio of 11.9%, comfortably above its target operating range of 11.0% to 11.5%. Its liquidity coverage ratio stood at 131%, and its net stable funding ratio was 113%, both well above regulatory minimums. Furthermore, WBC completed 62% of its $3.5 billion on-market share buyback, which signals a strong commitment to returning value to shareholders. Macro Headwinds Ease, and Potential Rate Cuts Offer Optimism for Future Growth Despite ongoing challenges such as high interest rates and cost-of-living pressures, the bank remains optimistic as inflation eases. We could see the Reserve Bank of Australia reduce the cash rate, which could provide relief to households and support business activity. This would likely benefit Westpac, especially as lower rates could stimulate further loan demand and improve the bank’s net interest income over time. Prudent Margin Management and Resilient Loan Portfolio Boost Investor Confidence Westpac’s NIM (Net Interest Margin) of 1.82% reflects a modest 2 basis point decline, primarily driven by increased mortgage competition and a shift towards lower-spread savings and term deposits. However, the bank has managed these challenges well, with higher earnings on capital and hedged deposits partially offsetting the margin decline. Net interest income declined 6% overall, but excluding Notable Items, it rose 1%, driven by a 1% increase in average interest-earning assets. Non-interest income, excluding Notable Items, grew by 9%, bolstered by higher financial markets revenue. This shows that Westpac is effectively diversifying its income streams. Impairment charges remain low at just 5 basis points, up slightly from 4 basis points, reflecting continued resilience by customers despite the macroeconomic environment. Technical Points to a Breakout, Adding to Positive Outlook for WBC We believe that Westpac is undervalued at its current price, and as the broader market stabilizes, we expect the stock to rebound. The bank’s solid financial position, impressive growth in deposits and loans, and commitment to enhancing customer service make it an attractive option for investors. Technically, we see a potential breakout above the near-term resistance at $31.9 per share. If the stock clears the $33.33 per share level, it could open the door for a rally back above $35, eventually reaching $40 per share. This technical setup further supports our positive outlook for WBC, and we believe it has significant potential to outperform in the medium term. National Australia Bank Ltd (ASX: NAB) We’re putting out a “hold” recommendation for National Australia Bank Ltd (NAB) for now. While the bank’s fundamentals remain strong, there are some near-term risks holding the stock back. Even though NAB’s first-quarter performance in FY25 shows positive growth, especially in business and home lending, the bank’s stock has been under pressure, partly due to higher impairment charges and increased competition. Performance Review: Solid Growth But Facing Margin Pressures and Rising Costs NAB had a solid start to FY25. They saw a 2% increase in deposit balances and 1% growth in Australian home lending, which outpaced the market. Business lending grew by 2%, with SME lending up by 1%. The bank’s efficiency efforts are also paying off, with progress toward their productivity savings goal of $400 million for FY25. However, rising costs, including personnel and financial crime-related expenses, along with some pressure on net interest margins from higher funding costs and competition, are weighing on the stock. Despite these challenges, NAB’s strategy to become the most customer-centric bank in Australia and New Zealand is on track, and they’ve made solid progress in executing it. Still, the stock has struggled to break free from pressure, with rising credit impairment charges and increasing non-performing exposures in business lending being key concerns. Challenges Ahead: Stock Under Pressure and Facing Increased Competition Right now, NAB’s stock is capped below $35.9 per share. It’s facing some headwinds, including competition in business banking and rising credit impairment charges. Although NAB has made strides with its strategy, regaining leadership in its key sectors is a tough task, especially with growing competition. Leadership changes, like the CFO departure, have also created some uncertainty in the near term. The economic outlook is improving, but there are still risks—like the potential impact of global economic slowdowns and geopolitical tensions. With cost-of-living pressures and higher interest rates lingering, these factors could affect NAB’s performance moving forward. Outlook for the Stock: Near-Term Resistance at $35.9, but Potential for Recovery We see NAB’s stock staying capped for now, hovering below the $35.9 mark. While the bank has solid long-term fundamentals and is on track with its strategy, short-term pressures are keeping the stock from breaking through that resistance level. If it can get above $36 per share, there’s potential for a rally, possibly pushing the stock back toward $43 per share, as investor sentiment improves, and the broader market conditions turn more favourable. Dividend Yield and Investment Appeal: A Reliable Income Stream for Investors On the plus side, NAB’s dividend yield has risen to near 5%, which is a nice perk for income-focused investors. Given NAB’s long track record of reliable dividend payments, it remains a good option for those looking for steady returns, even if growth in the short term is somewhat constrained. For now, we’re holding NAB shares while we wait for more clarity on its recovery. The bank is executing its long-term strategy well, but short-term challenges, such as credit impairments and market uncertainty, mean we’re not expecting big upside in the immediate future. That said, if NAB can break above $36 per share, we could see a stronger rally ahead. For long-term investors looking for dividends and stable returns, NAB is still a solid stock to hold, just with a bit of caution in the near term.
In this article, we’re going to share our thoughts on where the Aussie stock market is heading and take a deeper dive into five stocks from the top 10 large caps on the ASX. With the market recently experiencing a correction, it’s the perfect time to reassess your position and decide how to approach the next phase. There’s a lot going on right now, interest rate expectations are shifting, global economic factors are in play, and commodity-driven growth is providing some upside. We’ll break down how these elements are influencing the market and look at which sectors and stocks are likely to benefit. By reviewing these five major stocks, we aim to give you a clearer picture of where the opportunities might be, helping you navigate the current landscape and make smarter investment decisions going forward. Assessing the Reserve Bank of Australia’s Interest Rate Decision and Its Potential Market Implications Right now, the biggest question in the Australian market is whether the Reserve Bank of Australia (RBA) will cut interest rates in May. Market participants are betting there’s a 78% chance of a 25-basis-point cut, led by softening economic data—unemployment has ticked up to 4.1%, and inflation is easing, with the trimmed mean at 3.2% in Q4 2024. While this sets the stage for a rate cut, the RBA is keeping its cards close, saying it needs “clear, sustained” signs that inflation is under control before making a move. Source: (1) Trading Economics (2025) If the RBA does cut, we expect financials and real estate investment trusts (REITs) to benefit, as lower borrowing costs should boost lending activity and property values. However, history has shown that rate cuts don’t always guarantee an immediate market rally, sometimes they signal deeper economic concerns. That’s something we’ll be watching closely. Examining the Influence of the U.S. Federal Reserve’s Monetary Policy on Australian Equities and Currency The U.S. Federal Reserve is also playing a big role in shaping market sentiment here. By holding rates steady but hinting at possible cuts later this year, the Fed has injected some optimism into global markets, including Australia. A dovish Fed typically weakens the U.S. dollar, which can strengthen the Aussie dollar, a mixed bag for our economy. A stronger AUD makes imports cheaper and eases inflation, but it also makes Australian exports less competitive, which could put pressure on our resource companies. If U.S. inflation remains sticky and the Fed holds off on rate cuts, we could see renewed volatility in global markets, which would spill over into the ASX as well. Evaluating China’s 2.3 trillion Yuan Economic Stimulus and Its Ripple Effect on Australian Resource Stocks China’s latest 2.3 trillion-yuan economic stimulus package has given the Australian resources sector a much-needed boost. China is a key consumer of our iron ore, coal, and lithium, so any infrastructure push there tends to benefit mining giants like BHP, Rio Tinto, and Fortescue Metals. Source: (2) CNBS, TD Economics (2025) While the market has reacted positively, we’re keeping a close eye on whether this stimulus translates into sustained demand. China’s property sector remains a weak spot, and if growth stalls despite the government’s efforts, the recent rally in resource stocks could lose momentum. For now, we see this as a bullish catalyst for mining, but one that requires continued monitoring. Understanding Gold’s Surge Past USD 3,000 Per Ounce and Its Implications for Australian Investors Gold has been one of the standout performers this year, breaking above USD 3,000 per ounce. This reflects investor anxiety, whether it’s inflation concerns, geopolitical risks, or market volatility, gold has once again become a go-to safe-haven asset. Source: (3) Spot Gold USD (2025) This has been great news for Australian gold miners like Newcrest and Evolution Mining, which have outperformed the broader market. We still see room for upside, especially if central banks move toward rate cuts, which would lower the opportunity cost of holding gold. However, if inflation proves to be stubborn and rates stay higher for longer, we could see some short-term volatility in gold prices. Meanwhile, The Australian Dollar (AUD) has had a rough ride, with U.S. tariffs, global trade concerns, and shifting investor sentiment all playing a role. The US slapped a 10% tariff on Chinese imports, sparking concerns about China’s economic outlook. Since Australia’s economy is so closely tied to China, especially through commodity exports, this hasn’t been great news for the AUD. The uncertainty has made investors more risk-averse, pushing money away from AUD and into safer options. With all this uncertainty, investors have been piling into the U.S. Dollar (USD), which is seen as a “safe haven”. This shift has put more pressure on the Aussie dollar, making it harder for the currency to gain ground. Plus, with investors flocking to U.S. Treasuries, demand for our currency has taken a hit. China just reported weaker-than-expected inflation numbers, which has raised concerns about a slowdown. Since China is Australia’s biggest trade partner, any sign of trouble there tends to drag the AUD down. If demand for Australian exports softens, the currency could struggle to find support. Closer to home, Australia’s labour market hasn’t been looking too strong. Job numbers came in weaker than expected, making market participants wonder if the Reserve Bank of Australia (RBA) will consider cutting interest rates. So far, the RBA is taking a cautious approach, but if the economy continues to slow, we could see some shifts in policy that affect the AUD. Source: (4) AUD/USD spot (2025) Since Australia is a major commodity exporter, the AUD is highly sensitive to what’s happening with iron ore, coal, and natural gas prices. When commodity prices rise, the AUD tends to follow. But with concerns over China and global trade tensions, we’re seeing some pressure on key exports, and that’s weighing on our currency. For now, market sentiment remains cautious. If trade tensions drag on and China’s economic outlook doesn’t improve, the AUD could stay under pressure. On the flip side, if commodity prices rebound or the RBA holds firm on rates, the currency might find some stability. Assessing the Performance of the ASX 200 and the Sectors Leading or Lagging in 2025 The ASX 200 has shown some resilience despite all the uncertainty, bouncing back in recent weeks. However, it’s still down year-to-date, reflecting broader concerns around economic growth and monetary policy. Looking ahead, we expect resource stocks to continue benefiting from China’s stimulus-driven demand, while rate-sensitive sectors like financials and REITs could gain traction if the RBA starts cutting. Consumer stocks, on the other hand, could remain under pressure as households grapple with cost-of-living challenges and higher mortgage repayments. Tech stocks, which have struggled in the higher-rate environment, could stage a comeback if borrowing costs come down. That said, this sector remains highly sensitive to global macro trends, so we’re watching US economic data and Fed policy decisions closely. Strategizing Our Market Positioning for 2025 by Balancing Opportunities and Risks We’re maintaining a selective approach given the current landscape. Our focus remains on resource stocks, especially those benefiting from China’s economic recovery. Additionally, we view gold miners as a reliable hedge in these uncertain times. This strategy has helped us outperform the ASX 200 over the past twelve months. Despite the recent broad market correction, our combined growth, income, and mining portfolio has delivered an 11.29% return over the same period. Financials and REITs could see a lift from lower rates, so we’re watching for buying opportunities there. However, we remain cautious on consumer-facing stocks, where spending power remains constrained. Source: (5) Investor Pulse, Aggregated Portfolio Performance vs. ASX200 (2025) The key risks to our outlook include a potential inflation rebound, shifts in global central bank policy, and unexpected geopolitical developments. While there are plenty of opportunities in this market, we believe staying flexible and diversified will be crucial in navigating what’s ahead. Right now, the Aussie market is in a transition phase. There’s optimism around interest rate cuts and China’s stimulus, but also plenty of uncertainty about inflation, global policy shifts, and economic growth. For now, we’re keeping a balanced approach, leaning into areas with strong tailwinds but staying mindful of risks. As always, we’ll be keeping a close watch on the data and adjusting our positioning as the market evolves. That said, the Australian stock market is in a bit of a mixed bag right now, with challenges and opportunities both playing a part in shaping the landscape. To navigate this environment, it’s important to understand the key factors at play, like interest rate changes, global economic trends, and the continued strength in commodities. By focusing on stocks with solid fundamentals and resilience to global shifts, there’s definitely potential for growth even amid some uncertainty. As we work through this market correction, it’s crucial to be strategic in your stock picks . So, let’s dive into five of the Top 10 large caps on the ASX and review them—this way, you’ll know whether you should hold, buy more, or even sell. Commonwealth Bank of Australia (ASX: CBA) We’re maintaining a hold rating on Commonwealth Bank of Australia (CBA) for the time being. Despite the bank’s solid earnings growth and a strong balance sheet, its current stock price is above our fair value estimate of $120 per share, suggesting that it is somewhat overvalued at this point. Although CBA has shown resilience, with the potential for consolidation between $130 and $151 per share, we see limited immediate upside unless macroeconomic conditions improve. Over time, however, the stock could rebound and approach the $166 per share level, depending on how the broader economic landscape and the market perform. Valuation Premium: Stock Trading Above Fair Value Despite Solid Earnings Growth CBA has certainly delivered on earnings, reporting a 2% year-over-year increase in NPAT, reaching $5.13 billion for the first half of FY25. This increase was driven by strong loan growth and a reduction in loan impairment expenses, all of which reflect CBA’s healthy operating environment. On top of this, the bank raised its interim dividend by 5% to $2.25 per share, fully franked, showing its commitment to returning value to shareholders. Net interest margin (NIM) also improved slightly by 2 basis points to 2.08%, indicating the bank’s ability to keep funding costs under control while maintaining solid profitability. However, the bank’s valuation is a key concern. CBA is trading at a P/E ratio of 25x, which is much higher than its domestic peers like ANZ (13.5x), NAB (14.5x), and Westpac (16x). Given this premium, the stock appears to be overvalued, especially when considering the potential risks in the broader economic environment. Our fair value estimate of $120 per share suggests there’s limited upside at current levels. Unless there’s a significant shift in market conditions, CBA’s stock could struggle to move higher in the near term. Strong Balance Sheet and Conservative Risk Management, but Potential Risks from Rising Loan Impairments and Market Pressures CBA’s balance sheet remains strong, with a solid capital position and conservative risk management strategies. The bank has reduced its loan impairment expenses by 23% year-over-year, indicating stable asset quality despite some of the pressures consumers are facing in the current economic environment. CBA’s surplus capital gives it flexibility to navigate potential risks while still maintaining a dividend payout ratio of 73% of cash NPAT. That said, there are still potential risks to consider. Higher funding costs, combined with margin compression, could weigh on the bank’s profitability moving forward, particularly if economic conditions worsen. Although CBA has done well in managing its loan impairment expenses so far, there’s always the risk that rising impairments could hurt future earnings, especially if consumer credit quality begins to deteriorate due to ongoing economic pressures. Macroeconomic Challenges and Competitive Pressures Could Limit CBA’s Ability to Grow Earnings in the Near Term The Australian banking sector remains highly competitive, and CBA is no exception. Slower credit growth, heightened competition, and rising funding costs are key factors that could weigh on the bank’s ability to grow its earnings in the near future. Additionally, the ongoing cost-of-living pressures on consumers and the potential for higher interest rates could continue to dampen demand for loans. If consumer spending weakens further, the bank’s loan growth prospects could be hindered, which would negatively affect earnings. Beyond this, there are also broader macroeconomic risks to keep in mind, including inflationary pressures, geopolitical uncertainties, and the possibility of rising loan impairments as the economic situation evolves. The performance of the broader market will play a crucial role in determining how CBA fares in the coming quarters. If these challenges persist or worsen, they could act as headwinds for the bank’s growth. However, if the economic environment stabilizes, CBA might see a rebound in its performance. Overall, while CBA continues to perform well financially, its overvaluation remains a significant concern. We’re sticking with a hold rating because of the current valuation premium, which makes the stock less attractive in the short term. CBA’s earnings resilience and strong balance sheet are encouraging, but given the current market conditions, we believe the stock will likely consolidate in the $130 – $151 range until macroeconomic factors improve. Looking further ahead, if economic conditions stabilize and market sentiment shifts, CBA could potentially see a rebound toward its $166 per share target. BHP Group Ltd (ASX: BHP) BHP’s recent half-year results showed strong operational performance, with safe, reliable operations, and a focus on cost discipline. The company reported industry-leading margins and solid cash flow, enabling it to declare a generous dividend of $2.5 billion. Moreover, investments in growth, such as $3.2 billion in potash and copper, and the formation of the Vicuña Corp joint venture, further demonstrated BHP’s commitment to long-term value creation. However, despite these positive aspects, the company experienced a decline in revenue, down $2 billion, primarily due to weaker iron ore and steelmaking coal prices. This decline weighed heavily on overall financial performance, with a significant 11% decrease in EBITDA. Rising Debt and Slower Cash Flow Generation: A Potential Red Flag for Investors Despite its free cash flow of $2.6 billion, BHP’s net debt rose by $2.7 billion during the period, reflecting an increase in obligations like dividend payments and settlement obligations from the Samarco disaster. While the company remains committed to its disciplined capital allocation framework (CAF), the rise in debt and the anticipated increase in net debt for FY25 could raise concerns among investors about BHP’s financial flexibility. Although the company has a strong balance sheet, its growing debt load could create challenges if commodity prices remain volatile or global economic conditions worsen. Economic Uncertainty: Global Growth Outlook and Commodity Demand Remain Mixed On the macroeconomic front, there are clear signs of uncertainty that could affect BHP’s growth prospects. While China’s economy is showing signs of recovery, the overall global growth forecast remains tepid, particularly in developed economies where sluggish industrial activity persists. Despite China’s stimulus efforts and infrastructure investment, demand for BHP’s key commodities, such as iron ore and steelmaking coal, remains weak in many parts of the world. Meanwhile, potential trade tensions and policy uncertainties add to the complexity of navigating future demand dynamics. In this environment, we expect some volatility in commodity prices, which could pose risks for BHP’s revenue and profit generation. Inflation and Cost Pressures: Long-Term Concerns About Profitability Although inflation has eased from its post-pandemic highs, BHP continues to face pressures on its cost base. While wage growth has moderated in some regions, higher costs for raw materials and electricity, along with the lingering effects of inflation on labour, could weigh on future profitability. Given that production costs are still higher than pre-pandemic levels, BHP may find it difficult to maintain margins if commodity prices fail to recover or if operational challenges persist in key markets like Australia and Chile. This inflationary environment adds another layer of risk to BHP’s long-term cost management. Mixed Outlook for Key Commodities: Copper Demand Faces Challenges As one of BHP’s core commodities, copper has had a mixed outlook recently. While copper prices remained relatively elevated due to China’s stimulus plans and demand from the renewable energy and electric vehicle sectors, prices have retreated from recent peaks, reflecting broader commodity market volatility. While China’s demand for copper is expected to continue growing, external factors such as soft manufacturing demand in other regions and challenges in global supply could create headwinds for copper prices. Additionally, the cost curve for future copper mines is likely to steepen, meaning higher prices will be needed to incentivize new investment. As a result, any disruptions in supply or slow growth in demand could negatively impact BHP’s copper business, which is increasingly central to its earnings mix. While BHP remains a strong, resilient company with a solid dividend track record, we believe that the combination of rising debt, economic uncertainty, inflationary pressures, and mixed commodity outlooks creates a risk of further downside in its stock price. Despite our estimation that its fair value is close to its current market price of $40 per share, the broader market risks and specific challenges facing BHP in the near term suggest that it may be better to take a step back for now. We recommend selling BHP, but we’ll continue monitoring the market for opportunities to re-enter at a more favourable time. CSL Ltd (ASX: CSL) CSL Limited (ASX: CSL), the biotechnology company, has shown strong growth and potential across its various segments, which include rare and serious diseases, influenza vaccines, and iron deficiency therapies. Despite its solid fundamentals, CSL’s share price has not fully reflected this strength due to broader market pressures. Given the current market environment, we are advising a “hold” for CSL at this time, estimating a fair value of $301 per share, though we anticipate consolidation around $250 per share in the near to medium term. Solid Revenue and Profit Growth, Despite Market Challenges For the first half of FY25, CSL reported impressive financial results. The company posted a total revenue of $8.48 billion, reflecting a 5% increase at constant currency compared to the same period last year. Net profit after tax (NPAT) came in at $2.01 billion, marking a 7% increase on a constant currency basis. Additionally, NPATA (Net Profit After Tax and Amortization) stood at $2.07 billion, up 3% year-over-year, with earnings per share increasing by 3% to $4.29, and 4% when adjusted for constant currency. The company declared an interim dividend of $1.30 per share (approximately AUD 2.08), representing a 16% increase from the previous year. Strong Performance from CSL Behring, Leading to Growth in Core Segments CSL Behring, the company’s largest business segment, delivered strong results with total revenue of $5.74 billion, up 10% at constant currency. The Immunoglobulin (Ig) product line was a key contributor, with sales rising 15% to $3.17 billion, driven by strong demand for PRIVIGEN and HIZENTRA. Haemophilia products also performed well, bringing in $731 million, an 11% increase, with growth in IDELVION and HEMGENIX, CSL’s gene therapy for haemophilia B. Despite this strong performance, CSL’s influenza vaccine business, CSL Seqirus, faced some challenges due to a low rate of influenza vaccinations, particularly in the United States. CSL Seqirus Faces Headwinds from Low Influenza Vaccination Rates CSL Seqirus, CSL’s influenza vaccine division, reported a 9% decline in revenue at constant currency, with total sales dropping to $1.66 billion. Low immunization rates, especially in the U.S., impacted the sales of FLUAD and FLUCELVAX vaccines, which were down 17% and 12%, respectively. While this segment’s performance has been weaker, CSL Seqirus remains a critical player in the global influenza vaccine market, with growth potential driven by its pre-pandemic preparedness strategy, including the award of several tenders for the current H5 Zoonotic (avian bird flu) outbreak. CSL Vifor Continues to Show Strong Growth in Iron Deficiency and Nephrology CSL Vifor, focusing on iron deficiency and nephrology treatments, reported revenue of $1.08 billion, up 6% at constant currency. Iron product sales rose 3%, driven by continued volume growth in Europe despite generic competition. The nephrology portfolio also performed well, with TAVNEOS showing strong growth across markets and FILSPARI exceeding expectations in Germany, Austria, and Switzerland. These segments continue to demonstrate their value, contributing significantly to CSL’s diversified revenue stream. Financial Strength and Cash Flow Position CSL for Long-Term Growth CSL’s financial position remains robust, with cash flow from operations increasing by 18% to $1.26 billion. This was driven by strong earnings growth and effective working capital management. The company’s balance sheet is in a strong position, with net assets of $20.55 billion. Capital expenditures decreased to $366 million due to lower investment spending, while proceeds from business disposals also contributed to CSL’s solid financial standing. Outlook for CSL: Navigating Challenges with a Focus on Long-Term Growth Looking ahead, CSL has reaffirmed its guidance for FY25, projecting revenue growth of 5-7% at constant currency. The company anticipates NPATA for FY25 to be in the range of $3.2 billion to $3.3 billion, representing a growth of 10-13% over FY24. CSL remains focused on improving gross margins, particularly through the completion of the RIKA plasmapheresis device roll-out by June 2025. Despite the challenges faced by CSL Seqirus, the company is optimistic about growing market share in influenza vaccines due to its differentiated strategy. Furthermore, the strong growth prospects in iron deficiency and nephrology, driven by CSL Vifor, provide a solid foundation for future earnings. Recommendation: Hold CSL Amidst Market Pressures, With Potential for Long-Term Growth CSL’s core business units are performing well, particularly CSL Behring, which continues to be a major growth driver for the company. CSL Vifor’s success in the iron deficiency and nephrology markets further supports the company’s solid outlook. However, the performance of CSL Seqirus in the influenza vaccine segment has faced challenges, and broader market pressures continue to weigh on CSL’s stock price. Given the company’s strong fundamentals, we estimate CSL’s fair value is $301 per share, but near-term consolidation around $250 per share is likely. As such, we advise a “hold” on CSL at present, with potential for significant upside once market conditions stabilize. Westpac Banking Corp (ASX: WBC) We view Westpac (ASX: WBC) as a “buy” right now, with strong upside potential despite estimating its fair value at $32 per share. Despite this valuation, we believe the stock presents an attractive investment opportunity, especially as the broader market stabilizes and the stock could potentially rebound in the near term. In its first quarter 2025 update, Westpac reported a net profit of $1.7 billion, down 9% compared to the second half 2024 quarterly average, mainly due to Notable Items related to hedge accounting, which will reverse over time. Excluding these Notable Items, unaudited net profit increased 3% to $1.9 billion. This shows strong underlying growth despite external challenges. Pre-provision profit also grew by 3%, with revenue rising 2% and expenses increasing by just 1%. These figures point to good financial resilience and solid performance, even in a volatile environment. Strong Operational Momentum with Impressive Loan and Deposit Growth Westpac achieved a strong $14.4 billion increase in customer deposits during the quarter, with loan growth of $13.4 billion. Specifically, Australian housing loans (excluding RAMS) grew by 2%, business loans increased by 3%, and institutional loans were up by 6%. These strong growth figures demonstrate the bank’s ability to attract customers and generate new business, particularly in areas like housing and institutional lending. Westpac continues to enhance its customer service offerings. The bank is adding 200 new small business and SME bankers across Australia by 2027, and it has rolled out digital financial management tools for businesses to track cash flow and reconcile expenses. Additionally, WBC has launched new offset accounts, giving customers greater flexibility, and implemented initiatives like the ability to transfer credit card reward points to Everyday Rewards points. The bank has also been reappointed as the primary banking partner for the New South Wales Government, reinforcing its position as a key player in the public sector. These efforts further strengthen WBC’s customer base and market position. Westpac’s financial strength remains impressive. As of December 31, 2024, the bank reported a CET1 capital ratio of 11.9%, comfortably above its target operating range of 11.0% to 11.5%. Its liquidity coverage ratio stood at 131%, and its net stable funding ratio was 113%, both well above regulatory minimums. Furthermore, WBC completed 62% of its $3.5 billion on-market share buyback, which signals a strong commitment to returning value to shareholders. Macro Headwinds Ease, and Potential Rate Cuts Offer Optimism for Future Growth Despite ongoing challenges such as high interest rates and cost-of-living pressures, the bank remains optimistic as inflation eases. We could see the Reserve Bank of Australia reduce the cash rate, which could provide relief to households and support business activity. This would likely benefit Westpac, especially as lower rates could stimulate further loan demand and improve the bank’s net interest income over time. Prudent Margin Management and Resilient Loan Portfolio Boost Investor Confidence Westpac’s NIM (Net Interest Margin) of 1.82% reflects a modest 2 basis point decline, primarily driven by increased mortgage competition and a shift towards lower-spread savings and term deposits. However, the bank has managed these challenges well, with higher earnings on capital and hedged deposits partially offsetting the margin decline. Net interest income declined 6% overall, but excluding Notable Items, it rose 1%, driven by a 1% increase in average interest-earning assets. Non-interest income, excluding Notable Items, grew by 9%, bolstered by higher financial markets revenue. This shows that Westpac is effectively diversifying its income streams. Impairment charges remain low at just 5 basis points, up slightly from 4 basis points, reflecting continued resilience by customers despite the macroeconomic environment. Technical Points to a Breakout, Adding to Positive Outlook for WBC We believe that Westpac is undervalued at its current price, and as the broader market stabilizes, we expect the stock to rebound. The bank’s solid financial position, impressive growth in deposits and loans, and commitment to enhancing customer service make it an attractive option for investors. Technically, we see a potential breakout above the near-term resistance at $31.9 per share. If the stock clears the $33.33 per share level, it could open the door for a rally back above $35, eventually reaching $40 per share. This technical setup further supports our positive outlook for WBC, and we believe it has significant potential to outperform in the medium term. National Australia Bank Ltd (ASX: NAB) We’re putting out a “hold” recommendation for National Australia Bank Ltd (NAB) for now. While the bank’s fundamentals remain strong, there are some near-term risks holding the stock back. Even though NAB’s first-quarter performance in FY25 shows positive growth, especially in business and home lending, the bank’s stock has been under pressure, partly due to higher impairment charges and increased competition. Performance Review: Solid Growth But Facing Margin Pressures and Rising Costs NAB had a solid start to FY25. They saw a 2% increase in deposit balances and 1% growth in Australian home lending, which outpaced the market. Business lending grew by 2%, with SME lending up by 1%. The bank’s efficiency efforts are also paying off, with progress toward their productivity savings goal of $400 million for FY25. However, rising costs, including personnel and financial crime-related expenses, along with some pressure on net interest margins from higher funding costs and competition, are weighing on the stock. Despite these challenges, NAB’s strategy to become the most customer-centric bank in Australia and New Zealand is on track, and they’ve made solid progress in executing it. Still, the stock has struggled to break free from pressure, with rising credit impairment charges and increasing non-performing exposures in business lending being key concerns. Challenges Ahead: Stock Under Pressure and Facing Increased Competition Right now, NAB’s stock is capped below $35.9 per share. It’s facing some headwinds, including competition in business banking and rising credit impairment charges. Although NAB has made strides with its strategy, regaining leadership in its key sectors is a tough task, especially with growing competition. Leadership changes, like the CFO departure, have also created some uncertainty in the near term. The economic outlook is improving, but there are still risks—like the potential impact of global economic slowdowns and geopolitical tensions. With cost-of-living pressures and higher interest rates lingering, these factors could affect NAB’s performance moving forward. Outlook for the Stock: Near-Term Resistance at $35.9, but Potential for Recovery We see NAB’s stock staying capped for now, hovering below the $35.9 mark. While the bank has solid long-term fundamentals and is on track with its strategy, short-term pressures are keeping the stock from breaking through that resistance level. If it can get above $36 per share, there’s potential for a rally, possibly pushing the stock back toward $43 per share, as investor sentiment improves, and the broader market conditions turn more favourable. Dividend Yield and Investment Appeal: A Reliable Income Stream for Investors On the plus side, NAB’s dividend yield has risen to near 5%, which is a nice perk for income-focused investors. Given NAB’s long track record of reliable dividend payments, it remains a good option for those looking for steady returns, even if growth in the short term is somewhat constrained. For now, we’re holding NAB shares while we wait for more clarity on its recovery. The bank is executing its long-term strategy well, but short-term challenges, such as credit impairments and market uncertainty, mean we’re not expecting big upside in the immediate future. That said, if NAB can break above $36 per share, we could see a stronger rally ahead. For long-term investors looking for dividends and stable returns, NAB is still a solid stock to hold, just with a bit of caution in the near term.