Westpac Banking Corp (ASX: WBC) has reported the first quarter of its FY19, is it a buy?
Westpac Banking Corporation, more commonly known as Westpac, is one of Australia’s ‘Big Four’ banks and a financial-services provider headquartered in Sydney. It is one of Australia’s largest lenders to homeowners, investors, individuals (via credit cards and personal loans) and business. Its name is a portmanteau of “Western” and “Pacific”.
Westpac’s First Quarter FY19 Result
Westpac said that its unaudited statutory net profit for the December 2018 quarter was $1.95 billion, which compares to the quarterly statutory net profit average of the second half of FY18 (2H18) of $1.95 billion.
Westpac’s unaudited cash earnings for the quarter was $2.04 billion, which compares to the 2H18 average of $1.91 billion, or $2.05 billion before remediation charges relating to the Royal Commission.
Compared to 2H18, Westpac said that its net interest margins (excluding Treasury and Markets) were higher following some repricing late in FY18.
The contribution from Treasury and Markets was lower with weaker trading conditions.
However on the cost side of things Westpac said expenses were lower given the exit of the Hastings business and there being no additional remediation costs this quarter – although the bank does expect additional charges in the next quarter.
Westpac also revealed that it faces $30 million in insurance claims for the Sydney hailstorms and $35 million is expected, after reinsurance, from the Queensland floods.
The big bank reported its common equity Tier 1 (CET1) capital ratio was 10.4% at the end of December 2018, which was lower than September 2018 because of the dividend payment.
Is the Westpac share price a buy?
The Westpac profit continues to hold up despite a number of headwinds such as the Royal Commission and falling house prices.
If the profit can remain stable at around $2 billion per quarter then it would suggest the 94 cents per share dividend can be maintained as well. If so, that would be a very large fully franked yield of 7.2%.
I’m not prepared to say that Westpac’s profit is completely safe yet, there are still a number of Royal Commission issues to be resolved. Australian house prices keep falling too, which raises bad debt risks.
I’d prefer to wait for now, and instead go for exciting growth shares such as the ones in the free report below.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).