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 

Kalkine New Zealand Limited is a Financial Advice Provider (“FAP”) and is authorised by a Transitional FAP license issued by Financial Markets Authority (“FMA”) to provide financial advice. Kalkine provides only general financial advice through its research reports following a person becoming a member. The reports contain buy/sell/hold and other recommendations in relation to equity financial products. The recommendations and opinions [on this website] / [in this report] do not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions. If you act on the advice in the research reports, you may have to pay fees, expenses or other amounts (but not to Kalkine).  Further information about the complaints and dispute resolution process, as well as information about Kalkine’s duties are available on Kalkine’s website.  Please read our Financial Advice Provider (FAP) disclosure statement and Complaints Handling Guide, which are available on the website.