Why the Westpac share price is being keenly watched

Posted: 8 June 2021 12:47 pm

Westpac shares have risen 42% over the last year.

Shares in Westpac (ASX: WBC) have been the best performing among the Big Four banks over the last several months, making it an investor favourite. At the time of writing, the stock was up 0.5% at $26.75, helping prop up the banking shares index.

Why are investors eyeing the Westpac share price?

Westpac is the latest major bank to raise interest rates on fixed-rate owner-occupier home loans. The bank is lifting its 2- and 3-year fixed rates by 10 basis points.

Australia’s second biggest lender last month reported that its half year profit had soared 189% to $3.4 billion. Cash earnings were even better, rising 256% to $3.5 billion.

Much of that performance is attributed to the rapid recovery of the housing market and this has been underlined by the lender's ability to raise rates despite the RBA’s cash rate staying at the lowest level ever.

The housing market continues to have strong momentum and there is little to indicate that things could slow down in the near-term. Economists expect nearly double-digit growth in home prices this year in the largest capital cities of Sydney, Melbourne and Brisbane.

That should enable all the major banks, including Westpac, to increase dividend payout ratios and reward shareholders, analysts say. Westpac had expanded its mortgage book by $2.6 billion in the 6 months to 31 March, with most of the growth being driven by first home buyers.

Strong recovery

Westpac shares have risen 42% over the last year and are trading at their highest level in nearly 18 months. They are also close to levels last seen in 2019, before investor sentiment took a hit over its anti-money laundering failings.

That case was eventually settled with the financial crimes regulator last year after the lender agreed to a $1.3 billion penalty.

Investors are also keenly watching Westpac’s deliberations over whether to spin-off the bank’s New Zealand business.

That also indicates the Sydney-based lender is hitching on to the improving domestic economy, which should prop up lending in the key business and housing segments.

Last month, analysts at Citi termed Westpac as its "sole buy in the sector" and set a $29.50 target on its shares.

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.

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