Where next as the Westpac share price plunges following Q3 update?

Investors bid the bank’s stock lower following its Q3 trading update, with the key revelation being that WBC would not be paying its previously deferred interim dividend.

Westpac stock falls on latest trading update

The Westpac Banking Corporation (WBC) share price fell as much as 4.3% – to an intraday low of $16.83 per share – following the release of the bank’s third quarter (Q3) trading update.

Overall, the bank said it would not be paying its previously deferred interim (H1) dividend, that statutory net profits and cash earnings had both improved against the first-half quarterly average, and that approximately $30 billion worth of mortgages were currently being deferred.

At the time of writing the stock traded modestly off its morning lows, trading just above the $17 level.

Looking forward and in response to today’s update, analysts from Macquarie Wealth Management argued that:

‘While softer margins, a higher impairment charge, and a lower capital position can all be explained and rationalised, it is hard to see how WBC can re-rate on the back of today’s announcement, despite looking fundamentally cheap relative to peers.’

Macquarie has a Neutral rating and a 12-month price target of $17.50 on Westpac, suggesting some upside from current price levels.

The Q3 unpacked

On the bottom-line, the retail-focused Westpac reported a robust set of unaudited results. Here, third quarter statutory net profits came in at $1.12 billion (against a quarterly H1 average of $595 million); while cash earnings came in at $1.32 billion (against a quarterly H1 average of $497 million).

The bank noted that these strong results were driven by lower impairment charges, though flagged that margins remain under pressure – with WBC reporting a Q3 net interest margin (NIM) of 2.05% – as historically low interest rates drag on bank profitability across the board.

Elsewhere, Westpac booked an impairment charge of $826 million during the quarter, in a move aimed at 'further increasing provisions and provisioning cover.'

On the asset side of things, Westpac revealed that ~78,000 of its customers – with mortgages totalling $30 billion – continue to benefit from loan deferrals.

Want to take a position in Westpac, long or short?

Create an IG trading account or log in to your existing account to get started now.

Westpac share price: a question of dividends

In a move that likely disappointed income-focused investors, the bank today revealed that it would not be paying an interim dividend in FY20. Ongoing uncertainty and the desire to maintain balance sheet strength were the reasons cited for the decision.

For reference, as part of the FY20 interim results WBC’s Board said it would be deferring the interim dividend, citing the economic uncertainty created by Covid-19 as the primary reason.

Westpac looks to have played a similar card today: noting that the Board would revisit its dividend plans as part of the full-year (FY20) results – set to be released on 3 November.

Analysts from Macquarie Wealth Management currently expect Westpac to declare a 40 cents per share final dividend at its FY20 results, significantly down on the bank’s 2019 full-year dividends which totalling 174 cents per share.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.