Westpac Banking Corp

About the author:

Author name:

By Nick Harris

Job title:

Senior Analyst

Date posted:

19 May 2014, 12:41 PM

Sectors Covered:

Telecommunications, Technology

In early May, Westpac (WBC) reported another record result:

• Cash earnings were up 6% to A$3,772m
• The dividend was up 5% to 90cps
• Return on Equity (ROE) was up 43bps to 16.5%

Peter King, Chief Financial Officer of Westpac Banking Corp, presented to the Morgans network on Friday (16 May). 

Key takeaways from the presentation included:

• ROE improved in the half and WBC was able to increase the ordinary dividend by 2 cents per share.
• Given their strong financial position, WBC will neutralise the Dividend Reinvestment Plan (DRP). For every new DRP share issued WBC will buy these shares on market so no new capital will be issued.
• WBC has tightly controlled costs. It has a sector leading cost-to-income ratio and improving staff productivity.
• Wealth was the stand-out performer in the half but all areas of WBC performed well.
• Asset quality is improving. New and impaired assets reduced substantially but WBC still has strong provisioning coverage (including economic overlays). Impairments for the half were virtually zero which was exceptional.
• The outlook is for lending to 'trend higher' and productivity gains to largely offset business as usual expenses.

More information

We retain our Hold recommendation with a share price target of A$34.28. 

Morgans clients can access our detailed research on Westpac Banking Corp (WBC). If you are interested in finding out more, please contact your nearest Morgans office.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.