MENU

Why is Westpac up 2% today?

Despite the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) having lost over 40 points by mid-afternoon trading, each of the big four banks are trading in the green today with Westpac (ASX: WBC) leading the charge, having gained over 2%.

It is likely that the banks are a popular option for investors today due to speculation that an unexpected fall in the unemployment rate will likely prolong a further rate cut. Whilst shares in Westpac are currently sitting over $28.15, having gained 70c today, National Australia Bank (ASX: NAB), Commonwealth Bank (ASX: CBA) and ANZ (ASX: ANZ) have also gained between 0.7-1.5%.

Furthermore, Westpac this morning announced that it had agreed to purchase US$3.5 billion in government guaranteed debt which would reduce the bank’s refinancing requirement in FY 2014 by around $4 billion. Highlighting Westpac’s strong funding position, the latest buy-back will bring the total amount of government guaranteed debt bought back this year to A$7.3 billion.

Foolish takeaway

Although Westpac’s shares are currently sitting around 20% below their 12-month high in early May, the company still presents as an expensive option. The banks have been driven up in price significantly over the last 12 months by investors seeking high-yielding stocks in light of record-low interest rates. Even at today’s prices, it is difficult to justify purchasing shares in the banks when looking at likely future profitability.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading


Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.