ASX 200: three stocks to watch as of February 20th

ASX 200 overview

The ASX 200 fell 64 points (-0.83%) on Friday to close at 7346.8. After falling for a second successive week, the ASX 200 is now 3% below its February 7567 high, weighed on by the RBA's hawkish shift and earnings season landmines.

Last week the heavyweight Financial Sector lost 4.33%, weighed on by an 8% fall in CBA following its earnings report. Elsewhere, the Energy Sector (-1.94%) and influential Materials Sector (-0.63%) also fell during the week.

This week we review the recent news and charts of three ASX-listed financial stocks after an eventful week.

• Commonwealth Bank of Australia (CBA)

Last week the share price of Commonwealth Bank of Australia fell 8.17% to $100.97, giving back all the gains it recorded during the first five weeks of 2023. The catalyst for the fall was CBA's earnings report which showed that CBA's Net Interest Margins (NIM), a key measure of the bank's profitability, likely peaked in October at 2.16%, were currently at 2.10% and expected to fall to ~2% in FY24.

The fall in CBA's NIM results from intense competition for home loans and deposits, more than offsetting the benefit provided by the RBA's rate hiking cycle. The bank also mentioned concerns about the upcoming fixed rate cliff and cyber security. This was enough of a reason to see investors rush for the door in the current environment of low credit growth, rising delinquencies, and falling home prices.

Last week's fall in the CBA share price warned that a medium-term high is in place at $111.43 and that a deeper pullback is underway. This Wednesday, CBA will trade ex its 210cps interim dividend, which should see the share price break below support at $100.00.

There is interim technical support at $96.00. However, a stronger layer of support is at $92.50, which needs to hold to prevent a deeper pullback to $89.00/$87.00.

Commonwealth Bank of Australia daily chart

• National Australia Bank (NAB)

Last week the share price of National Australia Bank fell 5.78% to $29.85, giving back all and more of its strong gains in January after being caught in the down draft of CBA's earnings report and following its Q123 trading update.

While there was no obvious evidence of a peak in NAB's NIM (NIM expanded by 7bp from 1.72% in Q422 to 1.79% in Q123), intense competition in the mortgage and deposit space suggests there are downside risks to margins in FY24.

If Friday's break of trendline support at $30.00 is sustained in the early part of this week, it opens up a test of support near $28.50, coming from the October $28.39 low.

National Australia Bank daily chart

• Westpac (WBC)

Westpac was caught in the down draft of the CBA earnings report, following its own Q123 trading update where the share price fell 4.45% to close at $22.78.

While there was an intense focus on possible peak NIMs of Westpac's peers, there was not enough detail in the trading update to come to any firm conclusions on Westpacs profit performance.

As viewed on the chart below, Westpac is moving towards a layer of support at $22.60/50 coming from the January 2023 low, a cluster of highs in August 2022, the gap higher in early October and finally, uptrend support from the $18.80 low of June 2022.

Providing that the share price holds, a return to the range highs over the past 12 months at $24.50/70 is likely. However, should the share price see a sustained break below the $22.60/50 support, it opens the way for a deeper decline to support at $20.50/00.

Westpac daily chart