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Westpac delivers – but has it rallied too far?

Paul Rickard
8 November 2022

Since the start of October, Westpac had rallied almost 17% making it the best performing major bank over this period. So on the basis of the old axiom “buy the rumour, sell the fact”, it was no surprise to see it fall today by around 3% when it delivered an “as expected” full year financial result. Moreover, there was nothing in the result to suggest that Westpac was in a position to rise up in the bank “pecking order”. It remains with the ANZ anchored a long way behind market leader CBA and the fast rising NAB.

Westpac (WBC) – last 12 months

Source: nabtrade

For the full year, cash earnings were down 1% to $5.3bn. Excluding “one -off” notable items (such as losses from the divestment of assets), cash earnings were down 6% from $6.9bn to $6.6bn, mainly due to higher credit impairment charges and interest margin pressures in the first half. But half on half, cash earnings rose from $3.1bn in the first half to almost $3.5bn in the second half.

The $3.5bn second half cash profit was right on market expectations. For shareholders, Westpac elected to pay a fully franked final dividend of 64c per share, up from 60c in FY21, which took the full year dividend to 125c per share. This is equivalent to a payout ratio of 67% of cash earnings excluding notable items, in the middle of Westpac’s range of 60% to 75%.

The improvement in second half performance was on the back of a higher net interest margin (NIM), which rose from an average of 1.70% (excluding Treasury & Markets) in the first half to 1.80% in the second half. The exit margin (for the month of September) was higher again at 1.85%. An increase in volumes, and lower expenses, also helped second half performance.

Read the full report down below on Switzer Report: https://switzerreport.com.au/westpac-delivers-but-has-it-rallied-too-far/

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