Westpac share price: where next following interim results?

Westpac share price in Focus

Despite revealing strong growth across a number of key metrics as part of its interim report, the Westpac share price traded flatly on Monday and fell on Tuesday. Westpac closed out Tuesday’s session at $26.00 per share, down close to a full percent for the day.

From an earnings perspective, Westpac performed strongly, reporting triple-digit growth across its bottom-line. Here, statutory net profits were up 189% to $3,443 million, while cash earnings surged 256% to $3,537 million.

The bank attributed this robust profit performance 'to an impairment benefit reflecting improved asset quality and a better economic outlook,’ while also noting that 'notable items were also lower.'

Finally, while Westpac’s net interest margins fell 4 basis points, to 2.09% year-over-year, from the second half of 2020, they actually rose 6%.

Mortgage Portfolio at a Glance

Turning to Westpac’s loan book, the bank reported strong growth in its Australian mortgage book, rising $2.6 billion over the last 6 months. 13% of new home loans issued were from first-home buyers, while owner occupier loans rose 3%.

Despite those gains, year-on-year the total value of Westpac's Mortgage Portfolio actually fell slighlty, finishing out the March 2021 half at $443.6 billion. On a more granular level, investment property loans fell year-on-year, while owner occupier loans rose. Westpac's average loan size stood at $285,000 at the close of the half, up from $276,000 at the end of the prior corresponding period.

This uptick in loan size should come as little surprise to those watching Australia’s red hot property market, with Australian dwelling values up 10.2% since the low they recorded in September, 2020.

Dividends in Focus

For income-focused investors, Westpac said it would pay an interim dividend of 58 cents per share, on June 25. The ex-dividend date for the interim dividend is currently set at May 13.

With APRA, Australia's banking regulator, placing added scrutiny on Australian banks’ capital positions over the last year, investors were likely pleased to discover that Westpac’s capital ratio remains strong, with the bank reporting a CET1 ratio of 12.34% at the close of the half.

The Outlook

Commenting on the bank’s outlook, Westpac CEO, Peter King made a number of important remarks, including:

'While challenges remain, we expect the Australian economy to expand by 4.5 per cent in 2021, supporting a 4.6 per cent increase in total credit with residential lending expanding 6.5 per cent.'

'While we expect continued increases in home prices, as the supply of houses for sales increases, the rate of house price growth will likely moderate.'

'With a stronger economic outlook, and as Westpac becomes a simpler and stronger bank delivering more for customers, we are well positioned to deliver returns for shareholders.'

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