Westpac Banking Corporation (WBC)
BUY

Renovation continues

 7 Nov 2022
Sector: Financials

FY22 RESULT

Need To Know

  • Cash earnings in-line, dividend ahead of market.
  • Margin improvement evident in 2H.
  • Cost guidance lifted higher.

FY22 Cash earnings A$5.3bn vs A$5.25bn market

2H22 dividend 64cps vs 62cps market (67% payout vs 60-75% guidance).

Pre-provision earnings A$8.2bn vs A$8.1bn market

Bad debt charges A$335m vs A$300m market

2H2 Net Interest Margins (NIMs) +5bps to 1.90% (excluding volatile markets income +10bps).

FY24 cost guidance lifted from $8.0bn to $8.6bn in higher inflation, on-going higher regulatory costs.

Commentary: “not yet seeing increases in hardship or stressed assets”, “Credit growth is expected to ease”

Investment Implications

WBC 2H earnings result is in-line with the market, with the dividend ahead by 2cps.  There are clear signs of improvement across the business and the benefit of a more focused strategy.

The upward revision of cost guidance to A$8.6bn is not surprising given WBC was the only bank persisting with a dollar number target. The market is currently forecasting $9.0bn.

Relative to peer bank Results recently, WBC’s NIM momentum and cost story both look inferior in the half.

WBC share price has outperformed strongly over the last month leading into the Result. With earnings forecasts for FY23-24E likely to be flat post this Result, much of today’s Result is already reflected in the share price. 

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Stock overview

Share Price

Company overview

Westpac is Australia’s second largest retail bank.

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