Westpac Banking Corp (WBC) | SNAPSHOT
Profile: Westpac Banking Corporation (WBC) is an Australian banking and financial services provider. Consumer, commercial and institutional customers can access services and products through brands such as Westpac, St.George, Bank of Melbourne and other subsidiaries. As at September 2019, WBC had approximately 33,000 full-time equivalent employees and 14.2m customers. WBC is also listed in NZ (NZE:WBC) and in the US as an American Depository Receipt (NYSE:WBK).
History: WBC was established as the Bank of New South Wales in 1817, the first Australian bank and company. WBC acquired the Commercial Bank of Australia and changed its name to Westpac Banking Corporation in 1982. WBC is one of the four major banks in Australia. It is also one of the largest banks in New Zealand.
Earnings composition: The Consumer division contributed $3.3bn (43%) of FY19 cash earnings (excluding the Group Businesses division). The Business division generated $2.4bn (31%) of cash earnings in FY19. Westpac Institutional Bank and Westpac New Zealand reported $1.0bn (13%) and $985m (13%) of cash earnings respectively. Group Businesses reported a loss of $869m.
Most recent result – FY19: WBC cut its final dividend by 15% from 94 cents in FY18 to 80 cents per share in FY19, bringing the full-year dividend to $1.74. The dividend was cut in a “challenging, low-growth, low interest rate environment” where cash earnings were down 15% on the prior corresponding period (pcp) to $6.8bn. This decline includes $958m of customer remediation and related costs as well as $172m of restructuring costs related to WBC’s wealth business. Excluding these costs cash earnings were down 4% on the pcp to $8bn. Cash earnings per share (EPS) was 198 cents, down 16% on the pcp. WBC’s net interest margin (NIM) was 2.12% in FY19, down from 2.22% in FY18. The net interest margin is a bank income measure which is largely the difference in the interest banks receive for loans and the cost of its funds (such as interest on deposits) as a percentage of its loan book.
Company guidance: WBC completed a $2bn institutional share placement in November 2019 and has also announced a $500m share purchase plan for a total raise of $2.5bn. WBC expects average lending to be relatively flat over FY20. WBC noted that the September NIM was 2.04%, which compares to 2.07% in 2H19.
Important dates: Ex-dividend date was 12 November 2019. Payment date is 20 December 2019. AGM is scheduled for 12 December 2019.
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