Is the Westpac (ASX:WBC) share price a buy?

Is the Westpac Banking Corp (ASX:WBC) share price a buy? Some brokers have had their say after the FY21 first quarter update.
The post Is the Westpac (ASX:WBC) share price a buy? appeared first on The Motley Fool Australia. –

asx bank shares represented by large buidling with the word 'bank' on it

Could the Westpac Banking Corp (ASX: WBC) share price be worth a buy?

Some brokers have had their say after having a look at the numbers reported by the big four ASX bank for the first quarter of FY21.

So let’s have a look at some of those highlights first before getting to the broker thoughts.

Westpac’s FY21 first quarter highlights

The major ASX bank reported an unaudited statutory net profit of $1.7 billion, which compared to the second half quarterly average statutory profit of $550 million.

It also reported unaudited cash earnings of $1.97 billion, which was up on the second half of FY20 quarterly average of $808 million. Cash earnings were up 54% when excluding notable items.

The bank said that core earnings were up 28%, or up 3% excluding notable items.

Part of the profit growth came about from an impairment benefit of $501 million from improved credit quality, the stronger economic outcomes and a better economic outlook after COVID-19 impacts. Consumer delinquencies of more than 90 days were lower over the quarter, including Australia mortgage delinquencies over 90 days being 16 basis points lower to 146 basis points.

The number of loans that are in deferral continue to decline. It had $11 billion of Australian mortgage deferrals at 31 January 2021, with a significant roll-off expected in February and March.

Westpac’s net interest margin of 2.06% was up 3 basis points compared to the second half of FY20.

Discussing the outlook for Westpac, the CEO Peter King said:

We are also beginning to improve momentum in mortgages and while the book was little changed over the half, we have processed a significant increase in applications. Low interest rates, rising house prices, new construction, and high consumer confidence all points to continued recovery in home lending activity in 2021.

What do brokers think?

Broker Morgans was particularly impressed by the update, as the cash profit was 23% better than the broker was expecting. It was mostly better because of the impairment benefit with the provision release.

Another important point that the broker liked was the NIM of 2.06%. The NIM is an important profitability metric for banks like Westpac.

For Morgans, Westpac is the best big bank and thinks it’s a better pick than Commonwealth Bank of Australia (ASX: CBA).

Morgans is expecting Westpac to pay a dividend of $1.32 per share for FY21, which translates to a grossed-up dividend yield of 7.8%. It has a share price target of $27.50 for Westpac.

However, broker Ord Minnett wasn’t that impressed. It thinks that it will need to show more of a recovery if Westpac wants to continue to do better than other big banks.

Ord Minnett did say that Westpac is on track to consider extra capital returns with how strong the bank’s balance sheet is now with a CET1 ratio of 11.9%. Ord Minnett has a share price target of $24.50 for Westpac shares. The broker thinks that the bank will only pay a grossed-up dividend yield of 7.1% for FY21.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is the Westpac (ASX:WBC) share price a buy? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!