What the latest ASX reporting season revealed

Earnings growth has been fairly muted across the ASX this season, which has many companies feeling cautious and leaning on capital management to help drive shareholder returns. 

Here’s what has stood out so far.

Banks: Cost control in focus as growth slows 

While net interest margins mostly held steady across the major banks, their future profitability is in question as credit demand cools and pricing competition heats up. As those external factors make it more challenging to grow revenue, big institutions are turning to what they can control. 

That means they’re focusing on cost-to-income ratios, by: 

• looking to simplify and streamline operations,

• reducing headcount to lower their fixed cost base, 

• and digitising strategically to drive long-term efficiency. 

They’re also looking at their balance sheet settings, with disciplined lending criteria and forward-looking loss buffers to cover potential bad debts. We’re seeing banks move to preserve their capital, including by adjusting their dividend reinvestment plans or seeking underwriters.

Miners: The bright spot

The mining sector delivered resilient earnings, helped along by generally strong commodity prices and demand. Miners are increasingly focused on the metals and minerals required for renewable energy and emerging technologies: copper overtook iron ore as BHP’s primary EBITDA contributor for the first time, and Rio Tinto’s double-digit earnings growth was supported by its expanding future-facing commodities division. 

Meanwhile, Fortescue posted record shipment volumes, and higher spot prices for gold boosted cash flows and dividends at Evolution and Northern Star. 

Retail: A consumer under pressure

Cost-of-living pressures are still weighing on retail, with shoppers remaining cautious. Department store Myer informed the market that it’s anticipating weaker second-half trading in a preliminary update. Despite JB Hi-Fi and Super Retail Group both delivering record underlying sales, investors were cautioned by a softer start to the new financial year and margin pressures. 

In consumer staples, Coles reported strong underlying profit growth driven by cost savings and gains through automation. However, management noted that the company faces headwinds from persistent consumer cost-of-living pressures, geopolitical uncertainty, and greater regulatory complexity.

Energy: Geopolitics cut both ways

Conflict in the Middle East is the big story for the energy sector, pushing up oil prices and refining margins, but also adding operational uncertainty. Woodside Energy and Santos adapted to the volatility, balancing heavy spending on major LNG projects against long-term production gains. 

Ampol also benefited from the geopolitical situation, as surging refining margins drove a record first-half profit. However, Ampol management has made it clear that this was an extraordinary market windfall rather than a new normal. 

Healthcare: Turning a corner

The healthcare sector staged a solid recovery. CSL’s shares rallied after its full-year results met revised earnings expectations. This helped to restore investor confidence despite recent asset impairments, setting up a return to underlying profit growth. Cochlear gained ground on the continued rollout of its Nucleus Nexa System, and Pro Medicus delivered top-tier contract wins. 

They weren’t all winners, though; despite Sonic Healthcare’s steady top-line growth, investors focused on margin pressures and integration costs. Overall, the sector emerged as one of the best-performing this reporting season, rebuilding momentum after a challenging year. 

Property: Building on solid ground

Property remains constructive, with strong demand for industrial assets and data centre infrastructure helping to balance out mixed performance in office assets. Goodman Group’s results were driven by a massive data center development pipeline, while retail landlord Scentre Group reported steady operational growth backed by high occupancy and record customer visitation. 

The bigger picture: Capital returns across the market

This reporting season has seen a wave of capital returned to shareholders through buybacks, special dividends and higher payouts. A number of companies announced new or refreshed buybacks, including Bank of Queensland, AMP, CSL and Telstra, while Rio Tinto, BHP and BlueScope lifted dividends, underpinned by solid cash flows. 

Capital management has become an important part of delivering returns to shareholders, as underlying earnings growth falters. This suggests some boards are prioritising returns to shareholders over new investment, where return hurdles may be harder to clear in a low-growth economic environment.

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