Westpac’s earnings result fell short of Morgan’s forecast, although adjusting for “transient items” produces a better underlying result. The dividend of 80c, down from a 94c interim, is -4c lower than the broker forecast.
Asset quality is stable and the net interest margin in line with expectation. The broker is puzzled by the extent of the capital raising, which would take CET1 capital to 11.25%.
After taking into account new APRA requirements, Westpac looks over-capitalised to the broker. Earnings forecasts have been lowered and target falls to $31.50 from $33.00. Add retained, with Westpac remaining the broker’s preferred bank.
Sector: Banks.
Target price is $31.50.Current Price is $26.57. Difference: $4.93 – (brackets indicate current price is over target). If WBC meets the Morgans target it will return approximately 16% (excluding dividends, fees and charges – negative figures indicate an expected loss).
