Why the Westpac share price is being keenly watched
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.
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?
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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.
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