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...

to Morningstar Premium Membership

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.
Medibank: A quality business at the right price?
13/11/2014  The health insurer is a quality business but it will all come down two the price, according to two fund managers.
Telstra and sustainable returns
12/11/2014  The Australian telecoms giant has some exciting growth opportunities ahead of it and will continue to provide sustainable returns over the longer term.
Bank earnings wrap-up
07/11/2014  Morningstar sector head of financials David Ellis gives investors the lowdown on the most recent batch of earnings from Australia's major banks.
Medibank IPO Report
29/10/2014  While there were a few "surprises" in the prospectus, health insurer Medibank Private is still on track to deliver growth, according to Morningstar's Peter Warnes and David Ellis.
Opportunities in fixed income
28/10/2014   Bentham Asset Management principal and portfolio manager Richard Quin provides investors with some insights into fixed-income investment and the role that short-duration credit can play in a portfolio.
Key investor risks
21/10/2014  Voted among the 50 most influential people in finance today, author and former banker Satyajit
Finding value in small companies
14/10/2014  A portfolio of "terrific value" can still be achieved despite the stretched valuations in the smaller end of the Australian equities market.
Choosing quality businesses
07/10/2014  Credit investors adopt a different approach to equity investors when assessing a quality business, according to PIMCO's Tracy Chin.
Don't panic about PIMCO
30/09/2014  Morningstar's Tim Murphy talks about the recent portfolio manager changes at the global bond manager and why investors should not panic.
Medibank IPO Preview
25/09/2014  Morningstar's Peter Warnes and David Ellis preview the upcoming initial public offering of health insurance giant Medibank Private.
A better deal for investors
24/09/2014  Morningstar’s Anthony Serhan outlines what the government’s Financial System Inquiry will mean for investors.
Europe growth: Gone for good?
18/09/2014  Facing entrenched structural issues, the eurozone’s days of robust growth are likely over, but there are some reasons for hope, says Morningstar's Bob Johnson.
Morningstar Individual Investor Conference
09/09/2014  Whether you are building your savings or transitioning to retirement Morningstar will help you secure long-term returns. This conference is not to be missed. Register now.
Will the ECB cuts boost growth in Europe?
09/09/2014  The European Central Bank (ECB) has taken measures to ward off deflation and boost growth in the eurozone. Will these interest rate cuts be effective?
Building a moat in foreign exchange
03/09/2014  OzForex’s low-cost, online business model could prove to be a meaningful market disruptor, and the shares look like a bargain today.
1 stock that's close to perfection
29/08/2014  Morningstar head of equities research Peter Warnes discusses results from the likes of Ramsay Health Care and Woolworths as the curtains close over the fiscal 2014 earnings season.