This report is the updated version of the report uploaded on 13 October 2022 at 3:55 PM (GMT +11)
WBC Details
Westpac Banking Corporation (ASX: WBC) is one of four major banking organizations in Australia and one of the largest banks in New Zealand. The company offers consumer, business, institutional banking, and wealth management services.
Financial Results for the 1H’FY22
- Net interest income stood at AUD8,288 million in 1H’FY22, down AUD60 million, with a 7% rise in average interest-earning assets more than nullified by a 15-basis point (bps) decline in net interest margin.
- Net profit attributable to WBC stood at AUD3,280 million, down 5% YoY in 1H’FY22, primarily due to an AUD511 million (AUD358 million after tax) turnaround in impairment charges (a charge in 1H’FY22 versus a benefit in 1H’FY21).
- Profit before impairment charges and income tax expense grew 4% YoY in 1H’FY22, primarily due to a 10% decrease in expenses which was partly nullified by 4% lower operating revenue.
Key Updates
- On 10 October 2022, the company stated that it received a notice from shareholders requesting resolutions for consideration at Annual General Meeting 2022, scheduled on 14 December 2022.
Outlook
The company continued to advance on its Fix, Simplify and Perform priorities and is progressing well on strategic priorities. Further, the company emphasises digital transformation and customer service enhancement, growing its core markets and resetting the cost base to boost performance.
Key Risks
The financial condition and operating results of the Group are affected by several critical financial and non-financial risks. Financial risks include market, credit, financing, and liquidity risks. The non-financial risks include insurance risks, compliance risks, and operational risks.
Valuation Methodology: Price/Book Value Based Relative Valuation (Illustrative)
Stock Recommendation
Over the last 3 months, the stock has given a return of ~18.09%. The stock is trading higher than the average price of 52-week low-high range for the stock at AUD18.80-AUD26.44, respectively.
The stock has been valued using P/B multiple-based illustrative relative valuation, and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to P/B Multiple (NTM) (Peer Average), considering that consumer spending might get tempered by higher prices as well as higher interest rates.
Considering the resistance and target level achievement, current trading levels and risks associated, it is prudent to book profits at the current levels. Hence, a ‘Sell’ rating has been provided on the stock at the current price of AUD23.300 as of 13 October 2022 (Time: 10:49 AM (GMT +11), Sydney, Australia).
Technical Overview:
Daily Price Chart
Disclaimer: Kalkine’s Director Kunal Sawhney owns shares of Westpac Banking Corporation. Kalkine Pty Ltd has recommended Westpac Banking Corporation as general investment advice only (under AFSL 425376).
Westpac Banking Corporation (WBC) is a part of Kalkine’s Global Big Money Product
Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for share price chart and stock valuation is based on October 13, 2022, and all other data such as stock price performance as of October 14, 2022. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Disclaimer
This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.