Westpac shares rise on FY24 profit update

Here's what the banking giant is expecting next month.

| More on:
A man in a suit smiles at the yellow piggy bank he holds in his hand.

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

sdf

Westpac Banking Corp (ASX: WBC) shares are edging higher on Wednesday morning.

At the time of writing, the banking giant's shares are up almost 1% to $32.09

Why are Westpac shares rising?

Investors have been buying the company's shares this morning following the release of an update on its FY 2024 profit expectations.

According to the release, Westpac's reported net profit after tax in FY 2024 will be reduced by $123 million due to notable items. This may be better than the market feared, which could be helping its shares today.

Australia's oldest bank revealed that these notable items relate solely to unrealised fair value gains and losses on economic hedges and net ineffectiveness on qualifying hedges, which reverse over time.

Westpac is due to release its results on 4 November.

Segment changes

In addition, Westpac notes that segment operating income and operating expenses were restated in the first half of FY 2024. This followed the establishment of separate Consumer and Business & Wealth operating segments, the dissolution of the Specialist Businesses operating segment, and other reporting enhancements.

But the bank isn't stopping there. In the second half of FY 2024 additional restatements have been made. This relates to the reclassification of some deposit products from interest bearing to non-interest bearing.

This includes some mortgage offset accounts which had a minor impact on average interest earning assets and the reallocation of Enterprise functions' operating expenses to the Consumer, Business & Wealth and Westpac Institutional Bank segments.

The good news, however, is that these changes do not impact the bank's net profit after tax (NPAT) or the composition of line items.

Should you invest?

As with the rest of the big four banks, the broker community largely believes that Westpac shares are overvalued following strong gains over the past 12 months.

For example, a recent note out of Goldman Sachs revealed that its analysts had a sell rating and $25.84 price target on its shares. This implies potential downside of approximately 19% for investors. The broker commented:

We remain Sell-rated on WBC given: i) WBC's technology simplification plan (details here) comes with a significant degree of execution risk, given historically banks' large-scale transformation programs have struggled to stay on budget, and we note management today has flagged ongoing inflationary pressures, and ii) of the major banks, WBC's balance sheet is the most overweight domestic housing, which we expect will be more growth constrained than commercial lending over the medium term. Therefore, trading on a 12-mo forward PER of 15.3x, nearly two standard deviations above its 15-yr average, we stay Sell.

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 no position in any of the stocks mentioned. 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

Woman calculating dividends on calculator and working on a laptop.
Bank Shares

When does Macquarie expect Westpac to cut its dividend?

Here's the latest forecast for this banking giant's dividend.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Bank Shares

When will CBA shares stop rising? CSL might give us a clue

CSL's history might tell us what's in store for CBA.

Read more »

Woman and man calculating a dividend yield.
Bank Shares

Is the ANZ share price a buy right now?

Should investors be attracted to the major bank?

Read more »

stockmarket graphic in background with man looking at stockmarket on phone
Bank Shares

Which of the big four bank shares have doubled in the last 5 years?

These two blue-chip bank shares have risen above the rest in recent times.

Read more »

Couple looking at their phone surprised, symbolising a bargain buy.
Bank Shares

Wondering if CBA shares are overvalued? This shocking metric proves it

You won't see CBA in the same light after seeing this.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Bank Shares

Macquarie share price higher amid DRP dividend news

Macquarie has announced the share price of stock to be allocated through its dividend reinvestment plan.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Bank Shares

CBA shares are now worth a total of more than $300 billion. Here's why that's a problem

CBA’s ever growing stock market dominance is raising red flags. But why?

Read more »

An excited man stretches his arms out above his head as he reaches a mountain peak.
Record Highs

Breaking: CBA shares hit a new record of $180

CBA shares can't possibly keep rising can they?

Read more »