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...

Bogle forecasts low stock and bond market returns
21/10/2016  Warning of "much lower market returns" ahead, Vanguard founder Jack Bogle urges investors to seek low-cost investment products. From Morningstar US.
Finding the right flavour ETF amid expanding ETP menu
13/10/2016  From a relatively vanilla selection of exchange-traded funds (ETFs) on offer in the early 2000s, Australian investors can now choose from a wide range of exchange-traded products to suit various tastes.
Bright outlook for Aussie banks despite parliamentary committee and looming Basel IV regulations
12/10/2016  Australia’s ‘big four’ banks’ share prices have held up after their CEOs last week fronted a parliamentary committee, and have already absorbed the potential impact of more stringent capital requirements
Dividend, cashflow challenges hit investors but yield opportunities remain
06/10/2016  Technology, healthcare and telecoms hold opportunities for global equity investors even as utilities and energy stocks disappoint, says Jane Shoemake, director for global equity, Henderson
No place for set-and-forget asset allocation
04/10/2016  A 2016 company reporting season overview and explanation of why dynamic asset allocation is so important, from Dr Shane Oliver, chief economist and director of investment strategy, AMP Capital.
The search for bond yields
27/09/2016  Morningstar's Hybrid Handbook: Navigating the Australian Hybrid Market pulls back the curtain on corporate and bank hybrids, as John Likos, Morningstar's senior credit analyst, explains.
Here's which stocks will be the real winners in FY17
15/09/2016  Morningstar's Peter Warnes reflects upon the most recent corporate earnings season and shares his thoughts on which stocks could deliver strong performances in the near term.
Resolution Capital Global Property Securities
13/09/2016  Morningstar's Ross Macmillan examines a number of outstanding qualities that sets Resolution Capital apart from other managers.
India: Economy slows but stock market outlook is bright
07/09/2016  Despite poor recent performance, India remains a key investment for emerging market investors. Fidelity's Medha Samant explains the position.
China rally will continue but prepare for volatility
07/09/2016  Last year, volatility in the Chinese stock market spilled over into global stocks. This year, the market has been more encouraging--will the rally last?
Helping SMSF trustees negotiate super complexities
19/08/2016  Peter Hogan, head of technical at the SMSF Association, shares his insights on the changing super environment and how it will affect SMSF trustees.
Chasing income in a low return world
10/08/2016  Paul Reisz, Pimco's executive vice president and income product manager head, gives his insights on where bond investors may find yield in the difficult global market environment.
US stocks offer most attractive income, says Investec
03/08/2016  Investec's UK-based global equity income investor Blake Hutchins says despite the stock-market rally raising valuations, the US offers the most attractive options for income investors.
US stocks which will continue to rally
28/07/2016  The US stock market looks fairly valued as a whole, admits JP Morgan's Dennis Ruhl--but there are some sectors which will deliver further growth.
Xero underlines returning popularity of technology stocks
19/07/2016  The success of accounting software company Xero is part of a broader resurgence of technology companies, contrasting with the shifting fortunes of Australia's resources sector.
Zurich Investments Global Thematic
18/07/2016  Morningstar's Kathryn Young explains what sets Zurich Investments Global Thematic apart from rival global equities strategies.
Gold Managers: Platinum International Fund
15/07/2016  Morningstar's Kathryn Young explains what makes Platinum International a standout strategy and the rationale behind the fund's Gold rating.
Gold Managers: Magellan Global Fund
15/07/2016  Morningstar's Tim Wong explains why the Magellan Global Equities was upgraded to Gold and why there is more to the strategy than Hamish Douglass.
Is this graph to blame for Brexit?
13/07/2016  Britain's vote to leave the European Union seems to tie in with a feeling across the Western world--a rebellion against globalisation and those in power.
Global equities versus Aussie equities
11/07/2016  While global equities may be attractive on a relative valuation basis, it's important not to blindly follow a benchmark, Morningstar Investment Management's Brad Bugg says.