Westpac Banking Corporation 

WBC Details 

Westpac Banking Corporation (ASX: WBC) is a banking organisation that provides a range of banking and financial services including consumer, business and institutional banking and wealth management services. 

FY21 Result Performance (For the Year Ended 30 September 2021) 

• WBC recorded net operating income of $21.038 billion in FY21, up 2% from FY20 and the bank increased its reported net profit to $5,458 Mn in FY 2021.
• The bank’s cash earnings rose and its balance sheet remained strong. Notably, WBC has made progress with regards to the transformation into a simpler, stronger bank.
• WBC has posted CET1 capital ratio of 12.32%, reflecting a rise of 119 bps.
  

Source: Analysis by Kalkine Group

Recent Update 

• WBC made an announcement about an off-market share buy-back of up to $3.5 bn (Buy-Back). As per the bank, this happens to be an efficient means of returning surplus capital as well as reducing the number of shares outstanding.
• Catherine McGrath has been appointed as new Westpac NZ CEO.
• WBC has welcomed the release by APRA of the final capital framework, which would be effective from 1^st January 2023. WBC is strongly capitalised with the Common equity tier 1 (CET1) capital ratio of 12.3% (based on the current capital framework) at 30 September 2021.
  

Key Risks 

WBC is exposed to the general regulatory changes. These include changes to the lending laws as well as regulatory requirements. The bank is also exposed to the risks related to the COVID-19 pandemic as well as global slowdown.

Outlook 

Despite the challenging 2021, WBC is confident about the Australian economy and expects that it would be rebounding over the time span of next 12 months. Notably, the consumer spending would be increasing significantly as the states re-open as well as pent-up demand is released, mainly helped by the consumer optimism as well as sizeable savings.

Valuation Methodology: Price/Book Value Per Share (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using Price/Book Value Per Share multiple-based illustrative relative valuation and the target price reflects an increase of low double-digit (in % terms). A slight premium has been applied to Price/Book Value Per Share (NTM) (Peer Average) considering decent outlook for the broader Australian economy.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the current market price of $20.79 per share (Time: 10:51 AM (GMT +10), Sydney, Australia) on 14^th December 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note  2:  Investment  decisions  should  be  made  depending  on  the  investors’  appetite  on  upside potential,  risks,  holding  duration,  and  any  previous  holdings.  Investors  can  consider  exiting  from  the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance:  A  level  where-in  the  stock  prices  tend  to  find  resistance  when  they  are  rising,  and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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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).

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.