Analysts find good news in second tier
The Big Four banks' share prices have been underperforming the overall Australian equity market for the past few months and are likely to continue to do so as the US debt crisis plays out. In the meantime, analysts have turned their attention to other financial news in recent commentaries.Following Macquarie's annual general meeting last week, Goldman Sachs issued a note that focused on what it called Macquarie's "balance sheet upside". Macquarie has capital upside from unrealised gains in the MAp airports business and its aircraft leasing portfolio, according to the note. Macquarie Group's guidance for this second half is for net profit to fall below the A$403 million reported in the first half. Goldman Sachs said an end to the downgrade cycle was not yet in sight. It has the stock on hold.Deutsche Bank was encouraged by Bank of Queensland's Pillar 3 report last week. It said: "Asset quality is encouraging, despite the increase in loan arrears."The bank's Pillar 3 statement showed a significant fall in specific provision charges. The charge for specific provisions fell from $48.2 million in the previous quarter to $11.2 million in the latest quarter.Deutsche said: "There appeared to be little in the way of major new problem loans during the quarter ending May 31. Should this trend continue, the risk to earnings from bad and doubtful debts would be lessened. BOQ represents good value at current levels."Deutsche's view on the higher arrears is that they are the result of the Queensland floods and a general softness in the economy. "Much of the increase in arrears has come from residential mortgages, which are likely to see very low levels of loss... We are confident that the higher arrears rates will not lead to another big leg-up in impairment charges."Deutsche has the stock as a buyMacquarie Research issued a note on FlexiGroup, forecasting a 25 per cent increase in net profit for the year to June.Macquarie said FlexiGroup was an attractive proposition for struggling retailers. Unlike interest-free loans or credit cards, where the retailer pays a fee, FlexiGroup pays a commission to retailers who carry its Flexirent and Certegy products. "When retailers such as Harvey Norman and Bing Lee are experiencing gross margin pressure, FlexiGroup's products are likely to be viewed more favourably," said Macquarie.FlexiGroup reported net profit of $24.5 million for the six months to December. The result was 31 per cent down on the previous corresponding period, with the drop largely due to a tax adjustment.Volume growth was up by 27 per cent. Among the company's four divisions, sales for the mobile broadband plan provider, BLINK (a 2009 start-up), increased 87 per cent to $10 million.The Certegy interest-free operation (acquired in 2008) increased sales by 23 per cent to $179 million.Sales for the Flexirent business (small ticket leasing) were up nine per cent to $117 million, and Flexi Commercial's sales were up from $3 million to $26 million.