Diversified Financials - Australia: FY26 reporting season handbook: Top pick ASX, downgrade CPU to Underperform

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Diversified Financials - Australia: FY26 reporting season handbook: Top pick ASX, downgrade CPU to Underperform

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Diversified Financials - Australia

FY26 reporting season handbook: Top pick

ASX, downgrade CPU to Underperform

Rating Change

Pick stocks, not themes 08 July 2026

The Australian diversified financials sector has seen mixed performance YTD, with Equity

leadership from large caps (CPU and CGF) while smaller cap platforms (HUB, NWL and Australia

AMP) have underperformed. After a strong start to the year, ASX’s shocking FY27 cost Diversified Financials

warning reset shares lower, though have partly recovered since. We expect drivers of Freya Kong >>

share price performance to remain company-specific heading into FY27, rather than Research Analyst

thematic. ASX remains our top pick with 18% TR potential. While costs have been Merrill+61 2 9226Lynch5840(Australia)

significantly rebased higher, the market has factored in a very limited response on freya.kong@bofa.com

pricing which we think looks wrong. Stephanie Deeb >>

Research Analyst

We see a crowded trade… d/g CPU to Underperform Merrillstephanierebecca.deeb@bofa.comLynch (Australia)

CPU shares have recently rallied 25%. We think this looks overdone, despite the Mitchell Hawker >>

tailwinds we have previously highlighted: 1) strong corporate activity, 2) hawkish Fed Research Analyst Merrill Lynch (Australia)

outlook, and 3) tokenisation threats neutralised – see Computershare: Headwinds to mitchell.hawker@bofa.com

tailwinds; upgrading the outlook for CPU 29 June 2026. We estimate EPS growth of 12%

in FY27E, though expect this to be driven by self-help (modest cost outs, deleveraging)

and higher interest rates. Yields remain unattractive, at 3.0-3.6% over FY26-28E despite