Australian earnings preview – Westpac


Q3 Update:

Westpac Banking Corp (WBC) is Australia’s oldest banking and financial services group, with branches and operations throughout Australia, New Zealand, and the Pacific region as well as offices in key financial centres around the world. Westpac provides a variety of financial services including retail, business, and institutional banking, funds management, insurance, investment, and broking services. It is due to give a third-quarter trading update on the 18th of August.

Westpac has like the other “big 4” banks been heavily impacted by the Coronavirus. It has made a $1.9 billion provision to cover loan losses from the pandemic and has made an additional $1 billion provision for legal costs and penalties for breaching anti-money laundering laws in a case being brought by the financial crimes regulator, AUSTRAC.

Credit rating agencies have downgraded the outlook for the big 4 banks, while the banking regulator APRA recently confirmed banks should “cap dividends at 50% of earnings”. This comes as a relief to investors after APRA previously suggested banks should defer dividend payments entirely.  

As a guide, if Westpac were to declare dividends at 50% of consensus statutory EPS estimates of 100 cents per share then the FY20 dividend will come in around 53.5 cents per share or 3% fully franked.

Technically, the rally from the March $13.47 low, displays corrective characteristics after an impulsive fall from the $25.96 February high. The recent break and close below trend channel support $16.70 area was a negative development and should Westpac see a sustained break below $16.00 the next level of support is not until $14.80/50.  

To negate the weak technical outlook, the Westpac share price needs to return to the safety of the trend channel and then break/close above the resistance coming from recent lows $17.50/$17.60 area.

Australian earnings preview – Westpac

Source Tradingview. The figures stated areas of the 10th of August 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.