Finance stocks include banks and financial services companies
Many of Australia's biggest stocks are financial companies
It's easy to invest in finance stocks and ETFs via a share-trading platform
What are financial stocks?
The financial sector is one of 11 stock market sectors and plays a crucial role in a healthy economy. This sector includes companies that provide financial goods and services, like mortgage loans and insurance policies, to commercial and retail customers.
What counts as a financial stock?
Financial stocks can be classified by the following subcategories:
Banking.Diversified and regional banks that hold financial assets for customers and lend to small and medium corporations.
Capital markets. Companies that trade securities, like stocks and bonds.
Consumer finance. Providers of consumer financing and other services, including credit cards, personal loans and car leases.
Diversified financial services. Those that offer a range of products and services, such as banking, insurance and student loans.
Insurance. This industry encompasses insurance policies, from life and health insurance to property and car protection.
Thrifts and mortgage finance. Financial institutions that primarily offer savings accounts and originate residential mortgages.
How to invest in the financial sector
Invest in the financial sector by buying individual stocks or exchange-traded funds (ETFs). When you purchase a stock, you get shares of that company. Stocks have fewer fees but are riskier than ETFs. If you take the ETF path, you’ll get a basket of financial stocks. You’ll probably see higher fees, but it’ll lower your exposure risk.
Here’s an overview of how to start investing in Australia:
Choose a brokerage. Explore brokerage platforms in Australia to pick a firm that best fits your financial goals.
Open an account. Most brokerage firms let you open an account online. Some may require a deposit to get started, while others allow you to add money when you’re ready to begin investing.
Research securities. Use your firm’s research tools to browse different stocks and ETFs.
Place an order. When you’re ready to start investing, place an order to buy your security.
Monitor your portfolio. Log into your account to track your securities.
What are the best finance stocks in Australia? Here's a list of 11 of the top financial stocks on the ASX, based on things like market capitalisation and company profile:
Company summary
Commonwealth Bank of Australia provides financial services in Australia, New Zealand, and internationally. It operates through Retail Banking Services, Business Banking, Institutional Banking and Markets, and New Zealand segments. The company offers transaction, savings, and foreign currency accounts; term deposits; personal and business loans; overdrafts; equipment finance; credit cards; international payment and trade; and private banking services, as well as home and car loans. It also provides institutional banking services; funds management, superannuation, and share broking products and services; home, car, health, life, income protection, and travel insurance products, as well as retail, premium, business, offshore services. In addition, the company offers advisory services for high-net-worth individuals; equities trading and margin lending services; debt capital, transaction banking, working capital, and risk management services; and international and foreign exchange services. Commonwealth Bank of Australia was founded in 1911 and is based in Sydney, Australia.
National Australia Bank Limited provides financial services to individuals and businesses in Australia, New Zealand, and internationally. The company operates through Business and Private Banking; Personal Banking; Corporate and Institutional Banking; New Zealand Banking; and Corporate Functions and Other segments. It accepts transaction accounts, savings accounts, debit cards, and term deposits; and specialized accounts, such as foreign currency, business interest, cash maximiser, farm management, community free saver, statutory trust, and project bank accounts, as well as farm management deposits. In addition, the company provides home loans, personal loans, and business loans; vehicle and equipment finance; and trade and invoice finance, as well as business overdrafts and bank guarantees. Further, it offers insurance products consisting of home and content, landlord, travel, car, caravan and trailer, life, and business insurance products; and pension, self-managed super funds, cash management, and financial planning and advisory services. Additionally, the company provides investment products; credit, debit, and business cards; payments and merchant services; online and internet banking services; small business services; international and foreign exchange solutions; and industry specific banking services. The company was founded in 1834 and is based in Melbourne, Australia.
Westpac Banking Corporation provides various banking and financial services in Australia, New Zealand, and internationally. The company operates through Consumer, Business, Consumer and Business Banking, Westpac Institutional Bank, Specialist Businesses, and Westpac New Zealand segments. It offers savings, term deposit, business transaction, not-for-profit transaction, foreign currency, farm management deposit, project and retention trust, and statutory trust accounts; home, personal, business, and commercial loans; car and equipment finance; business overdrafts and bank guarantees; debit and credit cards; international and travel services; share trading services; investment products; and home, car, travel, life, caravan and trailer, credit card and loan repayment, boat, and business insurance products. In addition, the company provides corporate and institutional, transaction banking, financial market, corporate and structured finance, trade and supply chain financing, and industry specific banking and treasury services, as well as online banking services. It serves individuals; small, and medium enterprises; commercial and agribusiness; and private wealth clients; and corporate, institutional, and government customers. The company was formerly known as Bank of New South Wales and changed its name to Westpac Banking Corporation in October 1982. Westpac Banking Corporation was founded in 1817 and is based in Sydney, Australia.
ANZ Group Holdings Limited provides various banking and financial products and services to individuals and business customers in Australia and internationally. It offers home and personal loans, deposits, and credit cards through the branch network, home loan specialists, contact centers, self-service channels, and third-party brokers. The company also provides asset financing for small business owners, medium and large commercial customers, high net worth individuals, and family groups. In addition, it offers working capital and liquidity solutions, including documentary trade, supply chain and commodity financing, cash management solutions, deposits, payments, and clearing services; loan products, loan syndication, loan structuring and execution, project and export finance, debt structuring and acquisition finance, and corporate advisory services; and risk management services. Further, the company provides banking and wealth management services to consumers, and private banking and small business banking customers through its internet and app-based digital solutions, network of branches, mortgage specialists, relationship managers, and contact centers; and traditional relationship banking and financial solutions for small, medium, and large enterprises, agricultural business segments, and government and government-related entities. ANZ Group Holdings Limited was founded in 1835 and is based in Melbourne, Australia.
Suncorp Group Limited provides insurance and banking products and services to retail, corporate, and commercial customers in Australia and New Zealand. The company operates through Consumer Insurance; Commercial and Personal Injury; and Suncorp New Zealand segments. The Consumer Insurance segment provides insurance products, including home and contents, motor, and boat insurance products. The Commercial and Personal Injury segment offers commercial motor, commercial property, marine, industrial special risks, public liability and professional indemnity, workers' compensation, and compulsory third party products. The Suncorp New Zealand segment provides general and life insurance products comprising home and contents, motor, commercial property, public liability and professional indemnity, life, trauma, total and permanent disablement, and income protection. The company was formerly known as Suncorp-Metway Limited and changed its name to Suncorp Group Limited in December 2010. The company was founded in 1902 and is headquartered in Brisbane, Australia.
QBE Insurance Group Limited engages in underwriting general insurance and reinsurance risks in the Australia Pacific, North America, and internationally. It offers range of commercial, personal, and specialty products, such as commercial and domestic property, agriculture, public/product liability, motor and motor casualty, professional indemnity, workers' compensation, accident, health, financial and credit, and other insurance products, as well as marine, energy and aviation insurance products, and risk management solutions. The company also manages Lloyd's syndicates, as well as provides investment management services. QBE Insurance Group Limited was founded in 1886 and is headquartered in Sydney, Australia.
Insurance Australia Group Limited underwrites general insurance products and provides investment management services in Australia and New Zealand. It offers cars, motorcycles, dirt bike, homes, businesses, travel, boats, caravans, landlord, farm, business, trade, strata and investment property requirements, rural and personal, construction and engineering, compulsory third party, directors and officers, professional indemnity, workers' compensation, marine, liability, homeowners warranty, casualty insurance products, as well as reinsurance. The company sells its products through branches and agencies, call centers, online, insurance brokers, authorized representatives, motor dealerships, and financial institutions; and third parties under the NRMA Insurance, CGU, ROLLiN, WFI, Swann Insurance, NZI, State, AMI, and Lumley Insurance brands. The company was formerly known as NRMA Insurance Group Limited and changed its name to Insurance Australia Group Limited in 2002. Insurance Australia Group Limited was founded in 1920 and is based in Sydney, Australia.
Australian Foundation Investment Company Limited is a publicly owned investment manager. The firm invests in the public equity markets of Australia and New Zealand. It invests in value stocks of companies. It benchmarks the performance of its portfolio against S&P/ASX 200 Accumulation Index. It invests in companies across diversified industries. The firm employs fundamental analysis with a focus on bottom-up research to make its investments. The firm conducts in-house research to make its investments. Australian Foundation Investment Company Limited was founded in 1928 and is based in Melbourne, Australia.
Magellan Financial Group Limited is a publicly owned investment manager. It invests in global equities and global listed infrastructure markets across the globe. Magellan Financial Group Limited founded in 2004 and is based in Sydney, Australia.
Medibank Private Limited provides private health insurance and health services in Australia. The company operates in two segments, Health Insurance and Medibank Health. The Health Insurance segment provides private health insurance products, including hospital cover that offers members with health cover for hospital treatments; and ancillary cover, which provides members with health cover for healthcare services, such as dental, optical, and physiotherapy. This segment also offers health insurance products to overseas visitors and overseas students. The Medibank Health segment provides health management and in-home care services, as well as a range of telehealth services to government and corporate customers; and distributes travel, life, and pet insurance products. It underwrites its health insurance products under the Medibank and ahm brands. The company was founded in 1976 and is based in Docklands, Australia.
Argo Investments Limited is a publicly owned investment manager. The firm manages separate client focused equity portfolios for its clients. It invests in public equity markets of Australia. The firm employs a qualitative analysis with bottom-up stock picking approach to create its portfolio. It conducts in-house analysis to make its investments. Argo Investments Limited was founded in 1946 and is based in Adelaide, Australia with an additional office in Sydney, Australia.
Take a look at the following financial sector ETFs available in Australia:
VanEck Vectors Australian Bank ETF (MVB)
SPDR S&P/ASX 200 Financials ex A-REIT Fund (OZF)
BetaShares Australian Financials Sector ETF (QFN)
Betashares Global Banks ETF – Currency Hedged (BNKS)
How is the financial sector performing?
This is the chart for the Financial Select Sector VanEck Vectors Australian Bank ETF (MVB), which tracks the performance of Australian banking and finance companies on the stock market.
Why invest in the financial sector?
The financial sector may be an attractive long-term investment because of its potential for higher returns to help you stay ahead of inflation. For example, the S&P 500 Financials Index’s returned 32.1% in 2019, compared to the Federal Reserve’s estimated inflation rate of 2%.
Long-term trends also support growth in the financial sector. When the sector is strong, the economy thrives, which can lead to higher incomes for Australian consumers and bigger profit margins for companies. As Australians accumulate wealth, they need a way to manage their funds and plan for retirement.
Another attractive characteristic of financial stocks is their high dividend yield. The sector currently has a 4.19% dividend yield, compared to the S&P 500’s modest 1.96%.
What unique risks does the financial sector face?
The financial sector comes with considerable challenges and risks.
Regulation. Government red tape and legislative compliance can be a burden on companies, decreasing profit.
Drastic rise in interest rates. When rates rise, lenders generally make more money on the credit they issue to borrowers. But if banks raise interest rates before the economy is ready to adjust to the higher cost of borrowing, demand could drop and potentially trigger a recession. A weak economy can be detrimental to financial stocks.
Litigation. Businesses in the financial sector spend a lot on legal proceedings, which can impact profitability and share prices.
Weakening economy. Financial stocks are extremely sensitive to changes in the economy.
Debt liability. Many financial stocks come with some credit exposure risk. During an economic downturn, borrowers may default on their credit cards and loans, leaving some lenders with a mountain of debt.
Compare stock trading platforms
In order to purchase stocks or ETFs, you'll need a brokerage account in Australia. Compare your options using the table below to find the best fit.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Bottom line
The financial sector may be a good choice as a long-term investment in a healthy economy because of its generous dividends and long-term growth potential. But keep in mind that it’s one of the most volatile sectors of the stock market and comes with inherent risks.
REITs are not included in the financial sector. REITs left the category in 2016 to form its new, separate sector of the stock market.
Financial stocks are cyclical — their performance is generally tied to the health of the economy, which makes them vulnerable to the ups and downs of the business cycle.
Low interest rates attract more borrowers, which can lead to more capital projects, investments and more economic growth. Higher interest rates translate to more banking profit but may discourage spending.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
Tom Stelzer is a publisher and writer for Finder, covering investing and cryptocurrency.
He previously worked for Finder as a writer in Australia and the UK, covering things like personal finance, loans, investing, insurance as well as small business and business loans.
He has a Master of Media Arts and Production and Bachelor of Communications in Journalism from the University of Technology Sydney. See full bio
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We are committed to our readers and stands by our editorial principles
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
