ASX 200 jumps 1.6%, big ASX banks surge

The ASX 200 (ASX: XJO) is up 1.6% this morning after lending laws were relaxed.

Lending laws changed

It has been announced that borrowers will get faster access to loans including mortgages, personal loans, credit cards and payday lending. The laws that help decide whether customers can afford loans will be relaxed.

Banks are subject to standards set by APRA, but ASIC will be removed as a regular of bank lending obligations so that there isn’t duplication.

The onus for loans will put more responsibility on the borrower to ensure credit is available. Customers will need to provide accurate information about the ability to repay a loan.

One of the other changes is that mortgage brokers won’t be subject to responsible lending obligations.

The government is also introducing licensing rules for debt management businesses that try to chase consumers with repayments.

Critics of the change have said this may go against the spirit of the financial services royal commission. It may help borrowers get more access to credit, but in the past we have seen house prices rise if consumers have more access to credit rather than less.

The share prices of the big banks are up: Westpac Banking Corp (ASX: WBC) shares are up 6.8%, National Australia Bank Ltd (ASX: NAB) shares are up 6.4%, Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are up 5.1% and Commonwealth Bank of Australia (ASX: CBA) shares are up 3.7%.

Premier Investments Limited (ASX: PMV) FY20 result

Premier Investments reported that total sales were down 4.3%, though retail like for like sales grew 7.6% in constant currency terms.

It saw record online sales of $220.4 million, up 48.8%. The second half of FY20 saw online sales growth of 70%. Online sales contributed around a quarter of sales in the second half of FY20.

The retail business also boasted of record sales for Peter Alexander of $288.2 million, up 16.3%. In the final ten weeks of the second half of FY20 as stores reopened, its apparel brands business saw like for like sales growth of 14.1%>

Premier Retail’s underlying EBIT (click here to learn what EBIT means) rose 11.9% to $187.2 million. The online channel continues to deliver a “significantly higher” EBIT margin compared to the retail store channel. Online sales are up 92% in the first six weeks of FY21 compared to last year.

Net profit after tax (NPAT) increased by 29% to $137.8 million.

This result was clearly affected by COVID-19 impacts. There was widespread store closures and the company continues to look at its physical store network. Smiggle was hurt with schools closed and families not wanting to shop in stores.

The company is going to close its final 4 stores in Hong Kong by the end of October 2020. It’s going to close 55 out of 131 UK stores in FY21 and impair all of its UK assets. It’s going to impair all of its store assets in Hong Kong, Singapore, Malaysia and Ireland. But it will keep investing in Smiggle for growth.

Over 70% of the company’s overall store network in Australia and New Zealand are either in holdover or have leases expiring in 2020.

It’s trying hard to get landlords to lower rents. The company stated: “While it is not Premier Retail’s objective to close any stores, should landlords not accept the major shift in consumer shopping behaviour and adjust their rents according to consumer shopping preferences, store closures will be inevitable. Premier Retail’s underlying FY20 EBIT result includes a $8.7 million channel optimisation expense to potentially close up to 350 stores in Australia and New Zealand. In addition, the group has taken the necessary store asset impairments to close stores if suitable rental agreements cannot be reached.”

The Premier board has declared a final dividend of 36 cents per share, bringing the full year dividend to 70 cents per share, the same as last year.

Other news

The team over at Rask Media have covered the rest of today’s news, so make sure you head over there for more ASX share market coverage.

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