Westpac VS NAB share price: comparing the latest FY19 results

Now that the big four have all reported their FY19 results, we compare and contrast some of the key points of interest from the NAB and Westpac earnings reports, released this week.

NAB VS Westpac share price

With the National Australia Bank (ASX: NAB) and Westpac (ASX: WBC) releasing their FY19 results to the market this week, below we compare and contrast some of the key figures that both banks revealed as part of their full-year results.

Capital ratios: the New Zealand question

Capital requirements remain a key issue for the big four – both locally and in New Zealand.

Westpac’s current capital position indeed came off stronger than NAB’s as part of the bank's full-year results, with Westpac reporting a CET1 ratio of 10.7% – modestly ahead of APRA’s ‘unquestionably strong’ requirement.

NAB, by comparison reported a CET1 ratio of 10.38% – a shade below APRA’s capital requirements. Analysts from UBS described this as a ‘concern’ and suggested that it may indeed trigger consensus downgrades of the bank.

Moreover, with New Zealand’s Reserve Bank expected to hand down their own set of updated capital requirements – which at this stage look to be significantly stricter than APRA’s – the big four’s CET1 ratios are likely to be closely watched and scrutinised from analysts and investors moving forward.

Profits: more, always more

In the current low rate, post-Royal Commission (RC) environment, there were few surprises when both NAB and Westpac reported their FY19 cash profits. Indeed, both banks had already flagged substantial remediation costs associated with the RC prior to this week’s earnings releases – though their magnitude may have caused some surprise.

Even so, the National Australia Bank fared slightly better on the earnings front than Westpac, as its cash earnings came in at $5,097 million – just 10.6% lower than they did the year prior.

Westpac’s cash earnings fell more precipitously, dropping 15% to hit $6,849 million in FY19.

Customer remediation costs have (and likely will still for some time) drag on the big four’s bottom lines.

Dividends: cuts abound

For those seeking income from the big four, the 2019 full-year results likely conjured much disappointment.

Here, both NAB and Westpac slashed their dividends significantly. Specifically, NAB revealed a final dividend of 83 cents (representing a full-year dividend reduction of 16%). On the other hand, Westpac also cut their final dividend by 15% – to 80 cents down from 94 cents from the year prior.

As a positive at least, both NAB and Westpac’s dividends remain fully-franked.

Even with these cuts in mind, the dividend yield of both banks remains impressive. According to the ASX, Westpac currently has a dividend yield of 6.34% and NAB has a dividend yield of 5.84%.

To raise or not to raise?

Finally, and maybe one of the most important questions heading into the full-year results of NAB and Westpac was whether either of the banks would pursue a capital raise to shore up their balance sheets.

The National Australia Bank (ASX: NAB) decided against a capital raise, opting instead to pursue a dividend reinvestment plan (DRP) – totally around $700 million – underwritten by Morgan Stanley. The market seemed relieved by this decision, as investors pushed NAB’s share price some 3% higher in response.

By contrast, Westpac (ASX: WBC) decided to tap the capital markets, raising $2.5 billion in the process and issuing 79 million new shares as a result. Though not the only catalyst, the Westpac share price fell as much as 5% in response to the release of the bank's FY19 results.

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