The Westpac Banking Corp (ASX: WBC) share price will soon be in focus as it’s due to hand in its FY22 first quarter to investors.
The major bank runs on a different financial calendar than most other ASX shares. It’s expected to reveal its earnings on 3 February 2022.
But there are a few things that investors may want to keep their eyes on:
Net profit growth?
One of the most important things when investors are looking at profitable businesses is the direction of the profit. Is it growing? If the profit isn’t growing then the Westpac share price may not be able to sustainably lift.
Westpac has already gone through a profit recovery from the COVID hit of provisions for bad debt, reducing profit. Not only were those provisions not repeated in the second half of the 2021 calendar year, but banks are now releasing some of those provisions back as credit releases (reducing the provision). This has the effect of boosting profit.
Will Westpac grow profit decently or will it be largely flat?
Net interest margin (NIM)
One of the main ways that Westpac earns profit is by generating interest on the loans that it gives out to households and businesses.
But it also has interest costs when it pays interest to people for their savings account balances. Other funding sources includes wholesale funding.
Banks’ net interest margin is the interest rate it lends it out at compared to the price of the bank’s funding.
Bank NIMs have been falling in recent results as competition ramps up and more borrowers went for fixed rate loans that offered a lower interest rate.
Will Westpac give an indication that the NIM will keep falling? Or will the recent bout of interest rises from the bank lead to a higher NIM?
Shareholder returns?
The major banks of Westpac, Commonwealth Bank of Australia
(ASX: CBA), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) have been handing out billions of dollars of shareholder returns in dividends and share buy-backs over the last 12 months.
Will Westpac make any comments about any further elevated levels of shareholder returns? It could be a useful boost for the Westpac share price if it does.
In 2022, CommSec numbers suggest that Westpac is going to pay a dividend of $1.22 per share. That would be a dividend yield of 8.5% in FY22 if that’s what it pays. But, it’s unlikely a dividend will be declared in a quarterly update. It’s an interesting one to consider for dividends.
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