Westpac full-year earnings snapshot
Nicholas Grove  |  05/11/2012Text size  Decrease  Increase  |  

Nicholas Grove: Westpac has announced its results for the 2012 financial year, and here to give investors his initial impressions of the bank's earnings results, I'm joined again by Morningstar's David Ellis.

David, thanks very much for joining us.

David Ellis: It's pleasure, Nick.

Grove: First of all, David, were Westpac's earnings above, in line with, or below what you were expecting?

Ellis: Westpac came in with some good solid numbers. A little bit higher than we were expecting. The profit came in at just under $6.6 billion, we were sort of looking at about $6.5 billion, and the dividend was $0.01 higher than what we were expecting. But overall, a good set of clean numbers for 2012 for Westpac.

Grove: David, what were the key drivers of Westpac's result?

Ellis: The key drivers were solid loan growth, so round about 4 per cent loan growth. Quite strong deposit growth - customer deposits were up about 12 per cent, 13 per cent - and so net interest income was up a little bit. Non-interest income was up strongly, which was a pleasant surprise following a weak 2011 performance, particularly in the markets and treasury area within the bank. The cost growth was good, it was below, so it was less than the rate of revenue growth, which is a very important measure because then the cost-to-income ratio improved and Westpac has the sector-leading low cost-to-income ratio. So, for every $1 of revenue Westpac earns, they earn more profit than their three other major bank peers.

Grove: Finally, David, was there anything about the result that really surprised you or that will in any way alter your outlook for the bank?

Ellis: No. I suppose the only surprise is that it was moderately better than we were expecting, so it was a pleasant surprise. No negative surprises. Importantly, the indications from the bank and from what we can discern from the result are that the capital position is growing strongly and following our major bank investment thesis, we expect major banks to have surplus capital in approximately 12 months, maybe 18 months time. And with that surplus capital, all other things being equal, and so as long as the economy doesn't collapse, we expect the major banks, particularly Westpac and CBA, to initiate some type of capital management initiatives in 12 to 18 months time, which would more than likely be a special dividend or share buybacks.

Grove: David, thanks very much for your time.

Ellis: It's a pleasure, Nick.

Video Archive...

1 top stock set to open doors
27/02/2015  Morningstar's Peter Warnes shares his thoughts on results from the likes of QBE, BHP, Ramsay Health Care and Woolworths as the curtains close on the half-year earnings season.
Telstra picks right man for top job
20/02/2015  Morningstar's Peter Warnes gives his take on the most recent batch of corporate earnings, while also sharing his views on the appointment to the top job at Telstra.
2 stocks in earnings sweet spot
13/02/2015  Morningstar's Peter Warnes takes a look at the latest results from two big names in healthcare, as well as earnings from CBA and Telstra.
A further rate cut?
11/02/2015  Further rate cuts are expected while the Australian dollar will remain overvalued, according to Ibbotson’s Brad Bugg.
What's in store for listed investments?
05/02/2015  While the growth in LICs is more cyclical, ETFs continue to develop from stronger structural growth.
Key issues for SMSFs
02/02/2015  A government inquiry and tax concessions are among the key issues confronting trustees.
Emerging supermarket competitors
22/01/2015  Recent increased sales numbers from global supermarket chain Aldi continues to add competitive pressure on Australia’s big players.
Top SMSF tips for 2015
21/01/2015  Keeping up-to-date on legislative changes, avoiding excess contributions and ensuring sufficient cash flow is in place are just some of the simple things trustees can do to get a better handle on their SMSF.
Overcoming home bias
15/01/2015  Beyond Australia's borders and within the global investment universe lies a much more diverse range of opportunities across multiple sectors.
3 investment ideas for 2015
09/01/2015  What are the key themes investors should be aware of over the next 12 months? We identify the red flags and opportunities facing investors in 2015
Get your game on with this stock pick
05/01/2015  Crown's long duration licenses will allow the casino operator to continue to earn returns above its cost of capital over the next decade and beyond.
Opportunities in internet stocks
23/12/2014  Focused on sustainable competitive advantages, Morningstar StockInvestor's Matt Coffina sees potential in a handful of Internet stocks today.
Market outlook for 2015
18/12/2014  Morningstar's Peter Warnes gives investors an idea of what to expect from the Australian share market over the coming year, while also providing some tips for a stronger portfolio.
Morningstar's new ETF ratings
10/12/2014  Morningstar’s Tim Murphy discusses the new ETF analyst ratings and reports that are now available to investors.
Top opportunities in hybrids
09/12/2014  After a recent broad widening in pricing, investors may find opportunities in some of the older-style bank notes and high-quality corporate issuers.
Iron ore's changing landscape
03/12/2014  With small, high-cost miners set to struggle, Chinese growth to flatten and the low-cost majors pushing hard on expansion, the face of iron-ore mining is set to look very different.
Will QE boost European stocks?
28/11/2014  As ECB members hint quantitative easing could come sooner than expected in the Eurozone, we examine the prospects for European stock markets. From Morningstar UK.
Quality stocks, sustainable yields
26/11/2014  Anton Tagliaferro of Investors Mutual shares his outlook for the market at last month's Morningstar Individual Investor Conference.
Key risks in bond investing
21/11/2014  There are a number of risks investors need to consider in bond investing.
Confronting volatility and low growth
18/11/2014  Given issues such as recent volatility, rising global debt levels and the threat of European deflation, there are steps investors can take to safeguard their portfolios.