In key news on Australian stocks, Westpac Banking Corporation (AU:WBC) shares gained over 2% as of writing, despite the bank reporting a 16% drop in its net profit for the first half of FY24 to AU$3.34 billion. Investors reacted positively to the company’s substantial capital returns, including buybacks and dividends, supported by its strong balance sheet.
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Westpac announced a special dividend of AU$0.15 per share, along with an interim dividend of AU$0.75 per share. The interim dividend marks a 7% increase over the previous year’s interim payment. Additionally, the bank increased its buyback by AU$1 billion to AU$2.5 billion.
Westpac Banking Corporation is a premier financial institution in Australia, providing services to around 14 million customers.
Westpac’s First-Half Performance
Australian banks are currently feeling the heat of an economic slowdown and growing competition in the mortgage business. Over the past year, these banks have been compelled to offer competitive rates on home loans, squeezing their net interest margins.
In fact, Westpac experienced a decrease of 7 basis points in its net interest margin, settling at 1.89%. Meanwhile, net interest income remained stable at AU$9.13 billion. Overall, operating income fell by 4% year-over-year, due to flat interest income and a notable 23% drop in non-interest income.
Among its segments, the Consumer division witnessed a 32% decrease in its net profits, largely driven by intensified price competition in the mortgage sector. Despite this, the divisions’ net loans saw a healthy 5% increase, while deposits grew by 9%. On the other hand, the bank’s Business & Wealth segment emerged as the standout performer, showcasing a remarkable 7% rise in net profit.
Is Westpac a Good Share to Buy?
Analysts hold a bearish view on the Westpac Banking share price, as reflected in its Moderate Sell rating. After the results, analysts at UBS and Citi confirmed their Sell ratings on WBC stock, predicting a downside of 15% and 18%, respectively.
According to TipRanks’ analyst rating consensus, WBC stock has received four Sells, five Holds, and one Buy recommendation. The Westpac share price target is AU$24.22, which is 10% lower than the current share price.
