Westpac results preview: Will FY2021 earnings double?

Australia’s second-biggest bank Westpac may announce a hefty buyback along with a likely jump in its full-year net income, analysts said.

  • Westpac Banking Corp (ASX: WBC) share price closed 1.1% higher on Thursday (28 October)
  • Earnings per share for FY2021 could more than double, analysts predict
  • However, cost pressures and slimmer margins could persist
  • The bank will be launching a zero-interest digital credit card
  • Keen to take advantage of Westpac's rising share price? Open an account with us to long the stock now.

Westpac stock enjoys steady gains

Shares of Westpac Banking Corp attracted varied sentiment from research teams, with seven ‘buy’, five ‘hold’ and four ‘sell’ calls, even as analysts forecast its full-year bottom-line to more than double from the previous year.

Their average target price on Australia’s second-biggest bank stood at A$27.06, Bloomberg data showed. That implied a mild potential upside of just 4.3%, based on Wednesday’s closing price.

On Thursday, the WBC stock rose 1.1% day-on-day to finish at a four-month high of A$26.23.

This week, Jefferies and Morningstar gave ‘hold’ recommendations, with targets of A$25.30 and A$22 respectively, while Morgan Stanley rated WBC ‘overweight/in-line’ and eyed A$28.90 per share.

Read more: Beginner's guide to day trading

Westpac may see tepid revenue growth: analysts

Next Monday (01 November 2021), Westpac will report its full-year results for the 12 months ended September.

Analysts polled by Bloomberg predicted that the bank’s earnings per share could increase by 112.5% to A$1.354 for the latest financial year, from A$0.637 in FY2020.

Adjusted net income could also more than double to about A$5.33 billion, from A$2.61 billion in the previous year, the analysts estimated.

Any earnings surge for Australia’s major lender will be driven by a smaller-than-expected impact from the Covid-19 pandemic and a bullish real estate market that has supported loan volumes, Reuters reported.

However, analysts and investors expect Australian banks to face cost pressures and regulatory intervention to cool home loan growth.

At its latest results, Westpac is expected to announce a share buyback totalling about A$3 billion to A$4.5 billion, Reuters noted.

JPMorgan analysts said the likelihood of a large off-market buyback ‘may be well received’. They added: ‘WBC will be in focus for capital management and any progress update on its cost reset plan.’

Bloomberg Intelligence opined that Westpac’s FY2021 results may continue the first half-year’s trend of cash earnings jumping strongly due to expense control and lower impairments. However, ‘revenue growth may be weak due to low-single-digit asset growth and slimmer margins’, it wrote.

Westpac targets young consumers with digital card

This year, the company plans to launch a digital credit card with zero interest, aimed at young customers seeking fast and efficient payment services.

In its announcement last week, Westpac said consumers can apply for the card online or via the mobile app, to access A$1,000 of credit with no interest on purchases and no late payment fees.

Chris de Bruin, CEO of consumer and business banking at the group, highlighted that younger Australians are less likely to use a traditional credit card, as compared to older generations.

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