Westpac Banking Corp
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WBC Details
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Softness in first half performance: Westpac Banking Corp (ASX: WBC) shares plunged over 3.5% on May 02, 2016 given its lower than estimated first half of 2016 performance with cash earnings per share dropping by 2% yoy to 118.2 cents impacted by the slowdown in the economic conditions. The group’s cash earnings rose only 3% yoy to $3,904 million, but cash return on equity (ROE) lost 166 basis points to 14.2%. The Common equity Tier 1 capital ratio enhanced by 171 basis points to 10.5% on track to comply with the APRA regulations. The group’s lending and customer deposit growth were 6% and 5%, respectively, but the Expense to income ratio fell to 41.6% as compared to 42.5%.
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Recommendation: We give an “Expensive” recommendation on WBC at the current price of $30.43
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Performance by division (Source: Company Reports)
Australia and New Zealand Banking Group
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ANZ Details
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Attractive opportunity: Australia and New Zealand Banking Group (ASX: ANZ) fell over 2.2% on May 02, 2016 due to investor’s concerns over the bank’s performance ahead of its earnings results (May 03, 2016). Moreover, lower than estimated results by the bank’s peers also hurt the investor’s sentiment. On the other hand, ANZ is trading at attractive P/E and has a strong dividend yield with long term potential.
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Recommendation: We maintain our “Buy” recommendation on the stock ahead of their results at the current price of $24.60
Bendigo and Adelaide Bank Ltd
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BEN Details
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Rising competition: Bendigo and Adelaide Bank Ltd (ASX: BEN) also fell over 2.5% on May 02, 2016 following the trend seen for its peers. Moreover, the stock corrected over 21.4% during this year to date (as of April 29, 2016) due to rising price competition for mortgagees in Australia, subdued economy and regulations pressure. The group reported just 2.7% rise in underlying cash earnings during the six months ended on December 2015 as compared to the same period of last year.
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Recommendation: Despite the group’s efforts to boost its performance, we believe that the bank would continue to face pressure in the coming months and place an “Expensive” recommendation on the stock at the current price of $9.22
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