Mixed results from Westpac

Westpac reported an 8% rise in its full-year cash earnings to $7.097 billion, which was marginally better than forecasted.

WBC's dividend of 88c was an increase of 4% and in-line with consensus, while the 10c special dividend was not surprising either.

Perhaps shareholders could be a little disappointed by the overall quality, with pre-provision operating profit 1% weaker than many had expected. Costs seem to be the main culprit here, with 2H cost growth up 5% year-on-year. Margins were down two basis points on the year and were a touch below expectations, although the market doesn’t seem overly concerned by this given the stock is 0.3% higher at the time of writing (10:24 AEDST).

On the plus side, return on equity at 16% is higher than ANZ and shows greater efficiencies to extract earnings from shareholder capital. There were good improvements in asset quality as well, while the bank’s capital position is the best in its sector. Earnings in its wealth management division were solid as well, up 9% half-on-half.

On the negative side, cost growth, weak earnings momentum and weaker-than-forecasted net interest margins have been talked about on the floors today. The stock is trading on 15x 2014 earnings so it’s hard to see strong upside, given it is trading on 5% premium to its peer group. If global markets continue their steady rise then we can see PE expansion; although it’s hard to see strong upside to earnings from here.

Overall the result looks OK, but is not going to shoot the lights out and is unlikely to cause a rotation out of other bank stocks. 

IGA, may distribute information/research produced by its respective foreign marketing partners 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.

This information/research prepared by IGA or IGA Group is intended for general circulation. 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 or 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. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts