Why is the Westpac share price sliding today?

Posted: 1 November 2021 12:45 pm
News
Westpac-Shares-01Nov_1800x1000_Finder

Westpac shares are still up 43% over the past 12 months.

Like its Big Four bank peers, Westpac (ASX: WBC) has been an investor favourite over the last several months as the economy rebounded. However, on Monday it was among the worst performers on the ASX, sliding nearly 6% to $24.20 by the time of writing.

Why has the Westpac stock price been impacted?

Westpac shares have tripped despite the bank announcing a healthy set of full year earnings.

Australia’s second biggest lender reported a 138% increase in net profit to $5.5 billion and a 105% increase in cash profit, driven by a winding back in impairment charges and increasing momentum in the home loans market.

It also unveiled an up to $3.5 billion share buyback, becoming the last of the Big Four to do so, saying the economy is expected to rebound in 2022 and it has a strong capital position after a number of divestments recently.

The bank delivered a fully franked final dividend of 60 cents a share. It also said growth was returning in its lagging mortgages business, with the Australian home loans portfolio growing by 3%, and there was better momentum in the institutional and commercial businesses.

However, the Big Four bank's earnings were below market expectations.

Westpac’s cash earnings of $5.35 billion came in slightly below market forecasts for $5.5 billion.

The bank also indicated intense competitive pressures in the latter half of the year.

Margin, cost concerns

Westpac shareholders have already been jittery after the lender last month outlined a series of writedowns at its investment bank, and additional provisions for customer refunds and litigation costs worth a total $1.3 billion after-tax.

On Monday, the bank noted that its full year net interest margins dropped 4 basis points to 2.04%, prompting Westpac shares to drop more than 6% in early trading to hit their lowest level since March.

The bank’s core profit, excluding the writedowns, was 13% lower for the year. Cash earnings fell in the second half for all its units, including consumer, business, institutional and New Zealand.

“Margins were down in a competitive, low-rate environment, and as we foreshadowed, costs were much higher in FY21. This was mainly due to an increase in our workforce to improve risk management and support higher business volumes,” CEO Peter King said in a statement to the ASX.

It could impact the bank’s longer term program to reduce its cost base to $8 billion by 2024, from more than $12.6 billion in 2020.

Analysts are also worried the weaker than expected underlying result could imply higher costs and the dipping margins in the near term, which could in turn lead to earnings downgrades for the lender.

Serious about investing? Here's your new unfair advantage

Ticker Nerd uses advanced software to track hundreds of signals and data points to find stocks before they blow up. Don't miss out!
Get started for free

Looking to buy Westpac shares?

Choose an online share trading platform. There are dozens of platforms available for Australian investors. You can compare the features and fees before choosing the right one for you here.

Some trading platforms offer US stocks only, so make sure to select a platform that offers Australian stocks.

Westpac also offers an optional dividend reinvestment plan. This means that instead of receiving cash dividends, your money is used to purchase more Westpac shares. You can typically sign up either through your broker or directly through Westpac.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

Get more from Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site