Westpac (WBC) shares smashed on cost pressure
WBC -7.36%: Reported full year results this morning that were underwhelming. While Cash profit was only a slight miss coming in at $5.35b versus $5.42b expected, the real issue stemmed from higher costs, weaker net interest margins (NIMs) and a concerning trend half on half. While the dividend of 60cps was a positive and they also announced an up to $3.5b off market share buyback, focussing on the 2H showed a deterioration in profit and a NIM that went from 2.09% down to 1.99%. Expenses increased from $5,236m in the first half to $5,700m in the second – with $140m additional costs for ‘financial crime capabilities and systems, product governance, data and regulatory changes’. This saw their cost to income ratio rise from 61.6% to 63.1%. All up, a weak result and a ~7% decline in share price is probably warranted. Focus now will be on the large cost out program they announced and the ongoing turnaround that is (apparently) underway.
