Westpac share price on watch amid $4bn half-year profit

Australia's oldest bank has released its half-year results this morning.

| More on:
Young investor sits at desk looking happy after discovering Westpac's dividend reinvestment plan

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Westpac has released its half-year results for the six months ended 31 March
  • The banking giant has delivered a 22% increase in profit to $4 billion
  • This allowed the bank to increase its interim dividend by 15%

The Westpac Banking Corp (ASX: WBC) share price will be on watch today.

That's because Australia's oldest bank has just released its half-year results.

Westpac share price on watch amid results release

  • Net interest margin (NIM) up 5 basis points to 1.96%
  • Net interest income up 10% to $9,113 million
  • Operating expenses down 7% to $4,988 million
  • Net profit after tax up 22% to $4,001 million
  • Return on equity improved 205 basis points to 11.3%
  • Fully franked interim dividend up 15% to 70 cents per share
  • CET1 ratio up 95 basis points to 12.3%

What happened during the half?

For the six months ended 31 March, Westpac reported a 10% increase in net interest income to $9,113 million. This was underpinned by a 5% lift in its NIM to 1.96% thanks to rising interest rates.

Another positive was that Westpac reported a decent reduction in its expenses during the half. The company's operating expenses were down 7% to $4,988 million thanks partly to businesses sold.

Excluding notable items and these divestments, expenses were down 1% due to benefits of the simpler organisational structure, reduced use of third-party service providers, and lower remediation costs. This helped offset inflationary pressures on wages and third-party vendor costs.

This ultimately led to Westpac delivering a 22% increase in net profit to $4,001 million. Incidentally, Westpac has changed its internal and external reporting from reporting cash earnings to reporting statutory net profit from this result forward.

Management advised that this profit growth reflects the benefit of a higher net interest margin, growth in home and business loans and ongoing cost discipline. This was tempered by a rise in provisions for loan losses.

In light of this profit growth, the Westpac board elected to declare a fully franked interim dividend of 70 cents per share, which is up 15% year over year.

Outlook

Management appears reasonably optimistic on the future despite the challenging economic environment, which could be a positive for the Westpac share price today.

It highlights its healthy loan portfolio and how most mortgage holders are ahead with their repayments. It explains:

At a macro level, our loan portfolios remain healthy. Most mortgage customers are ahead on repayments. Offset balances were little changed and mortgage delinquency levels are low. Interest rates are now closer to their forecast peak, but we are focused on how long they stay high and what this means for household budgets and discretionary spending. We expect to see more stress in the period ahead, particularly in small business.

While the Australian economy remains resilient with low unemployment and high population growth, it is expected to slow over the remainder of 2023. Credit growth – both housing and business – will ease. Intense mortgage competition is expected to negatively impact industry and Westpac's margins in the next half.

Westpac enters this environment from a position of strength. We've set the balance sheet for the tougher outlook. We continue to run the bank conservatively, with the flexibility to support growth and handle the more challenging conditions.

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A man looking at his laptop and thinking.
Bank Shares

Should you buy the dip on Bank of Queensland shares?

The BOQ share price has dipped since mid-October.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

Are Macquarie or Westpac shares a better buy?

This would be my choice out of these banking giants.

Read more »

CBA share price represented by branch welcome sign
Bank Shares

Can the CBA share price hit $150 in the next year? Here's what the experts say

CBA has delivered outsized returns. Can it keep rising?

Read more »

Several fingers point at stressed looking man in the middle.
Bank Shares

Own ANZ shares? The bank is now #1 on a notorious list

The regulator is stepping up efforts.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Earnings Results

Westpac shares on watch amid $6.99b profit and new buyback

Has the big four bank delivered the goods for investors this year? Let's find out.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Why are ASX bank shares falling today when investor loans have jumped 30%?

It’s a rough day for the financial sector.

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices
Earnings Results

Macquarie share price sinks despite $1.6b half year profit and new buyback

How did this investment bank perform during the first half? Let's find out.

Read more »

Nervous customer in discussions at a bank.
Bank Shares

Buying ANZ shares? Here's your FY24 results preview

Will the banking giant deliver profit growth in FY 2024?

Read more »