WBC -2.61%: Fell today after the bank flagged two emerging pressure points ahead of its upcoming result – potential rising bad debts due to the fuel price squeeze caused by the Middle East Conflict, and weaker markets division revenues.
The bank has started setting aside more provisions for loans that may not be repaid, particularly from businesses heavily exposed to diesel costs such as transport operators, manufacturers and farmers. With diesel prices now around $3.20 per litre in Sydney, operating costs across these sectors have surged, increasing stress on some borrowers. At the same time, Westpac’s markets division has faced softer conditions with volatility in interest rates driven by the Iran conflict weighing on bond trading revenues.
At this stage analysts expect only modest downgrades to profit forecasts, with the clearer picture coming at Westpac’s half-year result on 5 May when the bank will provide updated guidance on credit quality and provisioning.
We remain bullish on the ASX banks, though this development could create some near-term noise for the sector.
MM remains long and bullish WBC
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