Price AnalysisStocks

Challenger Share Price Drops 10% Amid Profit Woes

  • Challenger share price falls during early trade.
  • The financial firm saw profits decline due to the deteriorating share market in the FY22 second half.
  • Statutory NPAT lost 57% Y/Y.

Challenger Limited’s share price declined by 10.53% today morning. The slide followed the firm’s financial year results announcement. The ASX-listed investment manager had its shares closing yesterday at $7.12 each. While trading this post, it hovered at $6.37 per share. Let us analyze the results that saw investors troubled today.

Challenger Share Price Falls Amid Profit Woes

  • Normalized profit prior tax stood at $472M – 19% up Y/Y.
  • Statutory NPAT (net profit after tax) $254M, 57% down from FY21.
  • AUM (assets under management) $99B, 10% down Y/Y.
  • 23 cents per share dividend noted a 15% increase from FY21.
  • Normalized pre-tax ROE (return on equity) 11.9%, 0.70% up Y/Y.

What Else from the Year?

The company’s prior-tax profit emerged towards the year guidance’s upper end. However, Challenger stated that lower share markets influencing mark-to-market investment familiarity and credit spreads triggered the 57% statutory NPAT drop.

Also, rising costs could mean additional pressure on the Challenger shares. Though the firm noted a minor 2% uptick in expense management, that number barred the Bank, acquired in Dec 2020. The Bank suffered an $11 million loss before interest & tax.

Challenger attributed the losses to integration expenses and significant regulatory. It stated that market situations have transformed since the acquisition, and the Bank will unlikely to realize the anticipated benefits in the expected timeframe. Meanwhile, Challengers has begun a strategic business review.

Challenger remained massively capitalized as of June 30, with a PCA (prescribed capital amount) ratio of 1.6 times. Also, the firm stretched its partnership over the year, highlighting a joint venture with SimCorp, a global software provider. Also, a definitive agreement with Apollo will form a joint venture.

Challenger Share Price Outlook

Considering today’s intraday loss, the Challenger share lost 6% this year. That matches the 6% YTD loss by the ASX/S&P 200 Index. The firm guarantees a healthy business in FY23 as it stays massively capitalized and positioned to capitalize on its distinct competitive advantages.

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