Buy Hold Sell: Is it time to ditch the banks? 7 ASX financials stocks to watch

This episode was filmed Wednesday 6th May, 2026.

While much of the market has been nursing its wounds in 2026, the financial sector has been quietly holding up. But nothing stays comfortable forever. 

With a fresh rate hike hitting the market and bank valuations looking increasingly stretched, one of our guests this week puts it best - the banks are running on Wile E. Coyote physics. Off the cliff, still running - just haven't looked down yet.

So where does the smart money go from here? Because if the bank trade is getting crowded, the case for rotating into other parts of the sector, insurance in particular, is building fast. Higher rates, a more benign catastrophe environment, and valuations that haven't re-rated yet. It's a combination that's hard to ignore.

To work through it all, Anna Dadic is joined by Julia Weng from Paradice Investment Management and Hamish FitzSimons from AllianceBernstein. Between them, they'll be analysing five stocks in the sector and sharing one high conviction pick each for where they see the real value.

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Edited transcript 

Anna Dadic: Hello and welcome to Livewire’s Buy Hold Sell. My name is Anna Dadic. The financial sector has been the quiet achiever for 2026 while other sectors have crumbled, but with the big banks so expensive and with the latest rate hike announcement, is the real value in corners of the sector such as insurance and wealth platforms?

To discuss, I’m joined by Julia Weng of Paradice Investment Management and Hamish FitzSimons of AllianceBernstein. We’re going to discuss and analyse five financial stocks.

Julia, I’m going to start with you to set the scene. The big banks are sitting at record highs. Is it time to get out of the crowded bank trade and move into cheaper areas in the sector like insurance?

Julia Weng: Well, the banks have been on a stellar run the last 24 months, supercharging the whole ASX almost single-handedly. Now let’s take a step back and think about what is the point of these RBA rate hikes? Well, we’ve been having persistently high inflation for some time now. We’ve seen house price growth year on year, very strong growth, which we’re thankful for. However, the point of these rate hikes is to slow down the economy.

So we do think the banks have had big earnings growth and have rerated sharply. Now we do see the start of a derate cycle and also earnings downgrades. We saw a couple of bank results come through recently and they’re already starting to put on economic overlays for macro risk, whether that’s from bad and doubtful loans ticking up or business loans souring. We do think that this is a slowdown we have to have.

And so we think there are better alternatives elsewhere, certainly given the starting point of where the banks are trading. So we’re hunting amongst financials ex-banks.

Anna Dadic: Hamish, how are you positioning within the sector as the rate cycle turns? And is there a part of the ASX financials that the market is still underappreciating?

Hamish FitzSimons: I would agree with Julia. I think the banks are sort of showing all the signs of what I think is best described as Wile E. Coyote physics, where you run off the cliff and you just keep running straight out for a while and you don’t realise. But at some point you look down and you hold up the little sign that says, “Oh dear,” and you kind of hit it.

We’re kind of off the cliff, running through the air, and at some point Wile E. is going to work it out and they’re going to get kicked. So what’s on the other side of this? As Julia was saying, interest rates are coming up. This is good for insurance. Generally speaking, this is a good time to be an insurer. So within insurance, we’re seeing a lot of opportunities and we can talk about it more specifically, but generally the shift out of banks into insurance is, I think, a timely one.

Challenger Ltd (ASX: CGF) 

Anna Dadic: All right, let’s get into our stocks now. First is Challenger Limited. They just tightened their profit guidance and are leaning into these higher rates. Hamish, is this the ultimate rate hike play? Are you a buy, hold, or sell?

Hamish FitzSimons: (BUY) Yeah, look, I mean, I have been covering Challenger for decades now and I think they’re in almost the best shape I’ve seen them in for a long time. For 20 years, they were frustrated. It was like Groundhog Day. Every year you’d turn up and they’d go, “We’re going to get regulatory reform this year,” and it wouldn’t happen.

They were kind of like Bill Murray waking up in the morning smashing the alarm clock because it’s been 15 years and it still hasn’t happened. But it’s finally happened right now. Bill Murray discovered the meaning of true happiness and Challenger got their regulatory reform, and they’re a better company now as a result of it. Their product is more attractive, it’s better for them to sell, and interest rates are going up.

I think there’s a lot coming Challenger’s way right now, so we’re a strong buy on that.

Anna Dadic: Okay. Julia, what’s your position?

Julia Weng: (HOLD) Yeah, we’re hold. We think Challenger is exposed to that favourable reform. However, we just want to see more demonstration of growth in the annuities book coming from super funds or other insurance companies. They’ve been, I guess, on that trend for a while and they’ve certainly had some wins. We just want to see a step change in adoption of annuities.

It’s also a tricky backdrop that they do well in. You need some volatility in credit spreads, but not too much. So it’s that Goldilocks environment where they really shine. It’s a tricky investment, but certainly at the right time it would be a good pick.

Computershare (ASX: CPU) 

Anna Dadic: Onto our next one is Computershare. They’re pushing into blockchain and tokenised stocks. Julia, I’m going to stay with you. Are you a buy, hold, or sell?

Julia Weng: (BUY) Yeah, Computershare is a buy for us. It’s derated significantly over the past few months on tokenisation, or the fear that the role of Computershare, which is a transfer agent, would be disintermediated by blockchain. Now we don’t think that would be the case.

The US rulings have suggested that the role of the transfer agent remains secure, but you’ve got more options to hold shares in a digital wallet. At the same time, Computershare is demonstrating growth. It’s a leader in the areas it competes in, whether it’s employee share plans, registry services, or corporate trust. It’s growing in all areas and an improving corporate activity backdrop is also helpful for Computershare.

We’re seeing pipelines building for IPOs, especially in Hong Kong. Debt issuance grows at roughly mid-single digits, and companies are still adopting more employee share plans as a way of retention and keeping employees aligned with them for longer.

So we do think Computershare is well placed and certainly could harness AI to have productivity benefits over the next few years. And it’s on an undemanding multiple where it is.

Anna Dadic: Hamish, are you a buy, hold, or sell on Computershare?

Hamish FitzSimons: (BUY) Yeah, look, we’re a strong buy as well. I agree with a lot of what Julia said. I think the other thing is that they are an interest rate beneficiary at the margin, so this environment suits them, similar to the insurers.

I’m getting a little bit of déjà vu with the blockchain stuff because I sort of feel like blockchain got invented about the same time as the iPhone and we all have iPhones and they do lots of stuff. Blockchain, we’re still kind of fumbling around for what it’s actually good for apart from speculative digital assets.

I can kind of see how you can get your head into this space around how it might be useful, but the ASX had a go. They’ve kind of shown it’s harder than what you think. There are a lot of interoperability issues transitioning from old technology to new. I think we’re in a hype cycle a little bit here. There’ll be a lot of noise. I’m just not sure CPU is a winner from the whole thing to start with.

So I’m agreeing with a lot of the points Julia’s making there.

ASX (ASX: ASX) 

Anna Dadic: All right, so double buy on Computershare. Onto ASX Limited now. The exchange is dealing with a major CEO transition and a fresh rate hike. Hamish, I’m going to stay with you. Buy, hold, or sell?

Hamish FitzSimons: (SELL) We’re a sell on ASX. I can see the attraction in it. I just feel like the reason why the stock is down a bit and why the CEO left is because they’ve had ongoing regulatory issues and the regulator has been unhappy with how they’re dealing with them. Ultimately, that kind of led to the CEO having to move on.

That means there are still unresolved issues by definition. So we are really looking for some of these issues to get resolved and for the company to become a bit more transparent about what it’s going to cost to resolve them. Then we’ll be more interested. So that’s the high-level view we’re taking there.

Anna Dadic: Okay. Julia, can the ASX turn it around?

Julia Weng: (BUY) Yeah, ASX is a buy for us. We acknowledge all the regulatory issues. It’s been through the wringer in terms of additional costs and also capital it has had to put down to address these issues. But we do think there is clear air on the horizon.

The cost envelope has been agreed with the regulators and so, yes, they’re going through a CEO transition, but given the regulators agreed on the cost envelope and the program of work in place, we do think the downside risk is probably not as great as it was 12 months ago.

At the same time, the revenue is flying for ASX. Heightened trading activity and futures trading are through the roof. So we do think it’s beating on revenue, which goes a long way to covering some of the cost headwinds.

Given ASX has derated sharply over the last 24 months and could be at the start of an inflection in earnings, we do think it’s a good opportunity to buy.

Macquarie Group (ASX: MQG) 

Anna Dadic: Onto Macquarie Group now, up 15% this month alone on green energy deals. Julia, are you chasing the momentum?

Julia Weng: (BUY) We continue to like Macquarie. Yes, it has been up strongly recently. Look, I think Macquarie is very strong in commodities trading and it should stand to benefit from the heightened energy volatility that we’re seeing out of the Middle East conflict.

It does a lot of hedging activity for both energy traders and users as they look to mitigate some of that energy volatility. Out of 2022, we saw Macquarie benefit from that and so we think we could see some renaissance of that.

At the same time, Macquarie has been good at recycling assets, whether it’s disposal of data centres or energy infrastructure. We think there’s potentially a handsome amount of performance fees which could underpin some earnings upgrades.

Anna Dadic: Okay, a buy from Julia. Hamish, how are you placed?

Hamish FitzSimons: (SELL) Yeah, well look, we’re a hold heading to a sell, I think, because the share price is up, right? I mean, it’s a sell for a good reason in that way. I agree with Julia’s point. Whilst you get a lot of press around the green energy deals, they make a tonne of money trading oil and gas and that’s been a good business lately.

The bigger picture thing with Macquarie is their return on equity has been pretty low for quite a while now. I think there’s a longer-term picture here in that, as Julia said, they own assets and then they sell them. If your 10-year bond goes down for 30 years, which is roughly what happened from 1990 to 2020, that’s really beneficial to being long assets.

Their ROE since the 10-year bond inflected up has been significantly lower. I would say these two events are probably not uncorrelated. So I think what their ROE is going to be going forward — history is a bit of a guide — but you’ve got to think about it a bit differently.

They’ve got to readjust to possibly lower returns in their buying and selling of assets over time. But in the short term, things are going relatively well.

The other thing I’d flag a little bit — you probably hear about Macquarie, like a lot of people — is they’ve got some software investments and that’ll be interesting. I’m not particularly concerned about it. I think when you put it in the context of their whole business, it’s probably relatively small.

I think the bigger picture question is: in this interest rate environment, over the next five years, what can Macquarie really earn?

GQG Partners (GQG Partners) 

Anna Dadic: Final stock for today is GQG Partners. Their investment performance is beating the market, but clients are still pulling money out of their funds. Hamish, is the outflow story too big to ignore?

Hamish FitzSimons: (SELL) Look, our problem with GQG is not that they’re getting outflows. It’s just that I feel like I’m buying a person, not a company. There is a star stock picker there and I don’t really need to read the annual report to some extent. I just want a sworn statement in blood from him every Monday morning that he’s not going to take the next year off and go surfing in Bali. That’s what drives value in the stock.

So I feel it’s very risky. It could be a good investment, but there’s this one risk in the middle. We’ve seen this before with other large wealth management companies with a star stock picker. If they leave, run for the door.

So I’m not saying it’s not going to do well, but I’m just saying there’s this big risk that I haven’t been able to get over.

Anna Dadic: Sure. Okay. Julia, what’s your position?

Julia Weng: (HOLD) We’re probably a hold. I don’t have a strong view on the stock. I agree with Hamish’s view on the key man risk we’ve seen with other fund managers.

Generally for these kinds of companies, you want to see a period of good performance followed by good inflows, and then the stock typically starts to rerate. So you want all of those things happening at once. That’s what we’d be looking for and waiting for.

Guest Picks

Insurance Australia Group (ASX: IAG) 

Anna Dadic: Now it’s time for our high-conviction calls. I’ve asked our guests to bring in one stock that they’re backing. Julia, I’ll stick with you. What’s your pick?

Julia Weng: Yeah, our pick would be Insurance Australia Group at the moment. So IAG is one of the leading personal insurers in Australia, certainly in home and motor, and also has some exposure in New Zealand.

Look, IAG got a bit belted in the last result in February because the RACQ acquisition kind of didn’t turn out as expected in the very early days. Before IAG got the reinsurance sorted out, it basically had one of the worst periods of catastrophes in Queensland — lots of rainfall and cyclones — which unfortunately turned RACQ into a loss-making business for that period of time.

However, we do think there’s a lot of remediation and reinsurance agreements have been struck since then. So we do think it’s on a much steadier footing going forward.

At the moment, insurers typically benefit from higher inflation. They are able to pass that on — unfortunately to homeowners —e but they can pass it on. We’re also going through a fairly benign period of catastrophes, so I hope that holds. And higher interest rates do actually help the investment income line for insurers.

It struck these volatility covers about 12 to 18 months ago. I don’t think it’s actually enjoyed any multiple rerate on the back of lower volatility and more predictability in earnings.

Suncorp Group (ASX: SUN) 

Anna Dadic: Okay. Hamish, what’s your pick?

Hamish FitzSimons: Yeah, look, similar but with a slight variance. I like IAG, but I like Suncorp Group even more. So they’re my most favourite child — not that I have favourite children — but Suncorp’s definitely my favourite.

All of the things Julia said I would agree with. I mean, Suncorp missed their catastrophe budget by $400 million in the December half and they went down by $4 billion. It was though the market was saying, “Well, you’re going to lose $400 million forever.” It’s just insurance has ups and downs. That reaction is irrational. So it was a great entry point.

Since then, they’ve signed a reinsurance deal which will very much remove a lot of that volatility. Interest rates have gone up. And the other thing I would call out, which I think is really positive and they’re not really talking about, is high petrol prices are starting to stop people driving.

The amount of trips taken and the kilometres driven are down mid-single digits across Australia in the last month. This is great if you’re a motor insurer. There are just fewer accidents if people drive less.

So there are a lot of things coming insurers’ way right now — in particular Suncorp, but also IAG — and they’re on relatively undemanding multiples after getting a bit of a kicking last year. So a very, very positive outlook for earnings growth there. I think you’re going to do really well owning both of them.

Anna Dadic: That’s two high-conviction calls for insurers. A massive thank you to Julia and Hamish for joining us on this week’s episode of Buy Hold Sell.

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