Westpac share price rises despite flagging H1 earnings hit
Below we examine the bank’s latest market update.
Westpac Banking Corporation (ticker: WBC) today revealed a number of notable items that would impact its first-half earnings. The impact of these items has been estimated to be approximately $282 million.
Despite that news, the stock actually rose on Monday, trading half a percent higher by the afternoon session. The Westpac share price has been on a tear recently, gaining 35% in the last six months alone.
Trading Update in focus
Centrally, the retail-focused bank today told the market that it expected its interim cash earnings, on an after tax basis, to be reduced by $282 million, as a result of a number of notable items.
Statutory net profits will also be impacted by these notable items.
Term Check: A notable item refers to a non-recurring gain or loss that may have a significant impact on a company’s operational results.
Included in the list of notable items were:
- $220 million in further provisions related to customer refunds, payments, litigation provisions and associated costs
- $115 million from writing down 'capitalised software and other intangibles'
- $56 million in total exit costs from the bank's relationship with IOOF
Westpac terminated its master relationship agreement with IOOF last December, with the bank at the time saying:
‘Westpac and IOOF have worked collaboratively to reach the agreement while supporting IOOF advisers and clients to transition to the market leading BT Panorama platform.’
- $84 million from the 'write-down of goodwill related to Lenders Mortgage Insurance'
- $113 million related to a loss on the bank’s sale of Westpac Pacific, in addition to transaction costs
The impact of these notable items were partially offset by gains made on Westpac selling its Zip holdings as well as net gains booked on its Coinbase investment.
The Coinbase IPO represents one of the largest listings of recent times. At current price levels, Coinbase has an implied market capitalisation close to US$60 billion, making it one of the most valuable publicly listed exchanges in the world.
At one point, Westpac’s Reinventure fund No.1 held ~1.2 million shares of Coinbase, though that exposure has been approximately halved following the IPO.
Westpac pointed out that the majority of the notable items (in terms of value) had been previously announced in the bank's first quarter trading update.
The bank is set to report its interim results on Monday, May 3.
Heading into those results, the bank remains overwhelmingly liked by analysts, carrying a Buy rating on average, according to Market Index.
Trade ASX-listed bank stocks long and short with IG today
Create an IG account or log in to your existing account to get started now.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
Live prices on most popular markets