Latest / What the Flux / NAB's credit dilemma | Origin's shares dip 10% | Paramount has a new billion-dollar buyer

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NAB's credit dilemma | Origin's shares dip 10% | Paramount has a new billion-dollar buyer · What the Flux

• 0:05
  Speaker 1: This is wat the Flux.
• 0:06
  Speaker 2: I'm Brett justin Ads Monday, the nineteenth of August.
• 0:09
  Speaker 1: Dozzy boy, isn't it the famous saying families who eat
• 0:12
  Speaker 1: pizza together stay together?
• 0:14
  Speaker 2: Exactly?
• 0:15
  Speaker 1: Get this one. Domino's Pizza CEO Don Mage has just
• 0:18
  Speaker 1: appointed his sister to become the new head of its
• 0:21
  Speaker 1: Australian division. And while this may seem like a call
• 0:24
  Speaker 1: from a left biel juzzy boy, she's actually worked as
• 0:27
  Speaker 1: a pizza maker at Dominoes and has even owned fourteen
• 0:30
  Speaker 1: domino stores.
• 0:31
  Speaker 2: Keeping it in the family Fox fam As it hits
• 0:33
  Speaker 2: the middle of the month, this is the time to
• 0:35
  Speaker 2: be checking your credit score to see whether it's improved,
• 0:37
  Speaker 2: whether it's gone down, and also the reasons behind all
• 0:40
  Speaker 2: the changes. We've got it all covered in the Flux
• 0:42
  Speaker 2: app in our credit score tool. To make sure you
• 0:44
  Speaker 2: gamload the app and check it out.
• 0:45
  Speaker 1: This month, three glass half full stories today, Dozzy boy,
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  Speaker 1: let's do it for our first. Nab has announced a
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  Speaker 1: one point seventy five billion dollar cash profit for the
• 0:56
  Speaker 1: past three months, but it's facing a pesky problem from
• 0:59
  Speaker 1: its custom It.
• 1:00
  Speaker 2: Looks like Nab isn't quite more than money right now.
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  Speaker 2: Be man, so tell me more, all right.
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  Speaker 1: So NAB is the second biggest of the big four
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  Speaker 1: banks based on its market value.
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  Speaker 2: And NAB really hangs its hat on being the largest
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  Speaker 2: in the business banking space.
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  Speaker 1: But Josieboit NAB released its third quarter results late last
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  Speaker 1: week and there was a little bit of cause for concern.
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  Speaker 2: Yeah well, it earned one point seventy five billion bakkarnies
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  Speaker 2: in cash profit for the quarter. This was almost an
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  Speaker 2: eight percent de client compared to the same time last year.
• 1:25
  Speaker 1: One point seven five billion dollars in profit and they're
• 1:28
  Speaker 1: still sweating. Must be more than just a bad day
• 1:31
  Speaker 1: at the old bank tell window. Yeah, well, they saw
• 1:33
  Speaker 1: their expenses rise slightly, but the biggest cost for NAB
• 1:36
  Speaker 1: was a big jump in its credit impairment.
• 1:39
  Speaker 2: Meaning customers not paying back their loans now.
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  Speaker 1: Joseboit NAB warned its investors of an impairment charge of
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  Speaker 1: one hundred and eighteen million bucks just for the first half.
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  Speaker 2: And supposedly that's because of its customers facing cost of
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  Speaker 2: living struggles.
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  Speaker 1: So now NAB needs to try continue growing its loan book.
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  Speaker 2: Well, at the same time, they've got to make sure
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  Speaker 2: their customers don't default and leave them holding a bag
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  Speaker 2: full of bad loans.
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  Speaker 1: M So what is the key learning here.
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  Speaker 2: Asset quality is the fancy banking term for the overall
• 2:05
  Speaker 2: risk associated with a bank's loan portfolio.
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  Speaker 1: Yep. High asset quality means that a bank is lending
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  Speaker 1: to customers with a high likelihood of paying them back.
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  Speaker 1: No IOUs or dodgy checks.
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  Speaker 2: But be manned. For a bank, it's relatively easy if
• 2:19
  Speaker 2: to boost its loan book by lending to customers with
• 2:21
  Speaker 2: lower credit worthiness, but doi boy.
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  Speaker 1: This can result in pretty significant losses down the track
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  Speaker 1: if those customers struggle to repay.
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  Speaker 2: The challenge for banks like NAB is to grow their
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  Speaker 2: lending but also ensure that they only issue loans to
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  Speaker 2: customers who were likely to repay them.
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  Speaker 1: And Dazi boy, NAB not only sees a one hundred
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  Speaker 1: and eighteen million dollar impairment charge.
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  Speaker 2: Oh no, no, They've also allowed for more than three
• 2:41
  Speaker 2: hundred and sixty million bucks in impairment charges in the future.
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  Speaker 1: So NAB's big challenge is growing its loan book while
• 2:47
  Speaker 1: also maintaining high asset quality.
• 2:50
  Speaker 2: For our second story, Origin Energy has announced a record
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  Speaker 2: annual profit, but it shares had a bit of a
• 2:55
  Speaker 2: blackout with a ten percent dip after some major red
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  Speaker 2: flags for the upcoming year.
• 3:00
  Speaker 1: Nothing like putting in a ten out of ten performance
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  Speaker 1: and then blowing the fuse at the finish line. Juzzy boy,
• 3:05
  Speaker 1: blackout alert, tell me more.
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  Speaker 2: Origin Energy is the largest energy retailer in Australia. We're
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  Speaker 2: talking over four point two million customers and late last
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  Speaker 2: year Origin was in the news almost more than Barbenheimer.
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  Speaker 2: That was after they rejected a twenty billion dollar takeover offer.
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  Speaker 2: But ben Man, while everyone has focused on the drama,
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  Speaker 2: Origin was quite literally raking in the killer watts.
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  Speaker 1: They announced an underlying profit of one point one eight
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  Speaker 1: billion dollars for the last financial year. That all sounds
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  Speaker 1: quite good. What is the red flag?
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  Speaker 2: Well, Origin is expecting that their energy markets business will
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  Speaker 2: drop in revenue, and not.
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  Speaker 1: Just a little piddly drop. We're talking somewhere between sixteen
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  Speaker 1: percent and thirty four percent, quite specific.
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  Speaker 2: And what is the reason for this big drop?
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  Speaker 1: Well, juzzy boy, the first thing that comes to mind,
• 3:48
  Speaker 1: I'm talking and increasing coal costs.
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  Speaker 2: Also decrease in revenue from households and businesses. Good news
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  Speaker 2: for consumers, not so good for Origin investors.
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  Speaker 1: Throw on top of that, it's a dividend of twenty
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  Speaker 1: seven and a half cents per share, which actually underwhelmed
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  Speaker 1: its investors. Next minute, Origin shares drop ten percent. Oh boy,
• 4:05
  Speaker 1: So what is the key learning here?
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  Speaker 2: The art of dividend policy is a very delicate dance.
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  Speaker 1: If a company is too generous, it can short circuit
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  Speaker 1: its future growth.
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  Speaker 2: But if a company's too stingy, it may risk losing
• 4:18
  Speaker 2: investor loyalty.
• 4:18
  Speaker 1: Now, for context, Jasi Boy, a company's dividend policy determines
• 4:22
  Speaker 1: how much profit it will return to shareholders in the
• 4:24
  Speaker 1: form of this dividend.
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  Speaker 2: Now, last year, Origin paid twenty cents per share to
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  Speaker 2: its shareholders.
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  Speaker 1: And this year it's dividend jumped up to twenty seven
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  Speaker 1: and a half cents per share.
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  Speaker 2: But this increase wasn't quite enough to satisfy some shareholders
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  Speaker 2: who were hoping for even higher returns.
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  Speaker 1: For Origin, the challenge is how to continue rewarding investors
• 4:41
  Speaker 1: while also navigating this transition to renewable energy, which will
• 4:45
  Speaker 1: require a significant investment. For our third and final story,
• 4:50
  Speaker 1: Paramount Globals shares jumped seven percent late last week as
• 4:54
  Speaker 1: a surprise new entrant prepares a counter offer for this
• 4:57
  Speaker 1: media giant.
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  Speaker 2: A hot new bombshell enter. Who's the villa? So what's
• 5:01
  Speaker 2: going on here? Be Man?
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  Speaker 1: Well, Josy Boy. Paramount is the American film studio and
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  Speaker 1: TV company that's obviously one of Hollywood's oldest.
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  Speaker 2: It's the name behind Titanic, the Transformer series, Shrek, you
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  Speaker 2: can't forget that one, and Mission Impossible as well.
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  Speaker 1: Now, last month, after a lot of back and forth
• 5:15
  Speaker 1: and back and forth, Paramount agreed to merge with Skydance
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  Speaker 1: Media in a whopping twenty eight billion US dollar deal.
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  Speaker 2: But be Man, before they signed these nuptials, they agreed
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  Speaker 2: to a forty five day period where other bidders could
• 5:27
  Speaker 2: submit a competing offer.
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  Speaker 1: And now Josy Boy Low and or behold, another party
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  Speaker 1: has entered the mix and is expected to put in
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  Speaker 1: a competing bid to buy Paramount.
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  Speaker 2: Plot twist, uhha.
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  Speaker 1: This mystery person is Edgar Bronfman Junior. He's actually the
• 5:41
  Speaker 1: ex CEO and chair of Warner Music Group, and this
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  Speaker 1: news sent Paramount share price up seven percent and Josie
• 5:46
  Speaker 1: Boy to get the deal over the line. Bronfman's framing
• 5:49
  Speaker 1: his deal as being a better offer for Paramount's current shareholders.
• 5:52
  Speaker 1: And why is that Well, largely because his offer won't
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  Speaker 1: dilute the holdings of those current shareholders as much as
• 5:58
  Speaker 1: the sky Dance offer.
• 5:59
  Speaker 2: So what is the key landing here?
• 6:01
  Speaker 1: Shared dilution happens when a company issues new stock which
• 6:04
  Speaker 1: reduces the percentage owned by current shareholders.
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  Speaker 2: And then man dilution can happen for a lot of reasons,
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  Speaker 2: including during mergers and acquisitions.
• 6:11
  Speaker 1: Yeap, new shares can be issued to fund the merger
• 6:13
  Speaker 1: or the acquisition.
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  Speaker 2: In Paramount's case, it's agreed that Skydance would invest eight
• 6:17
  Speaker 2: billion US dollars into Paramount, but then merge the two
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  Speaker 2: company shares together.
• 6:21
  Speaker 1: Which would mean existing shareholders would have their ownership stake reduced.
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  Speaker 2: And not all shareholders were too thrilled about this deal.
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  Speaker 1: But if mister Bronckman goes ahead with this bid, it's
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  Speaker 1: expected that he will offer current shareholders some more ownership.
• 6:33
  Speaker 2: Which could leave sky Dance in the dust. Oh boy, Foxams,
• 6:37
  Speaker 2: did you know? Sixty six percent of Australians do not
• 6:39
  Speaker 2: know their credit score and that's why in the Flux
• 6:41
  Speaker 2: Credit Score tool, you can get access to your score
• 6:43
  Speaker 2: each and every month to see what went up, what
• 6:45
  Speaker 2: went down and how you can improve your score for
• 6:47
  Speaker 2: the future. Make sure you download the app and check
• 6:49
  Speaker 2: out your score this month.
• 6:50
  Speaker 1: Thanks for listening and we'll see you on Wednesday.