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What to expect from the Westpac half year result next week

The Westpac Banking Corp (ASX: WBC) share price will be on watch next week when it becomes the final bank to release its half year results.

Ahead of the Monday morning release, I thought I would take a look at what the market is expecting from the banking giant.

What is Westpac expected to announce?

According to a note out of Goldman Sachs, its analysts are expecting Westpac to report half year cash earnings (before one offs) of $3,314 million, down 22% on the prior corresponding period.

Despite this decline in cash earnings and its remediation costs, the broker expects Westpac’s CET1 ratio to be above 10.6%.

In light of this, Goldman’s analysts “expect WBC’s Board to look through the large one-off items that will impact 1H19 and leave DPS flat at 94¢.”

Not everyone is convinced about this, though. Analysts at Macquarie Group Ltd (ASX: MQG) believe that Westpac’s payout ratio is elevated at current levels.

According to a note out of the investment bank, it has suggested that there is a risk of a dilutive dividend reinvestment plan or even a cut to its dividend.

Whilst I expect Westpac to hold firm with its 94 cents per share interim dividend, I wouldn’t be overly surprised if the bank followed in the footsteps of National Australia Bank Ltd (ASX: NAB) by making a cut next week.

Another metric to keep an eye out for is the bank’s net interest margin (NIM). Goldman Sachs expects its NIM to be steadier in the first half, down 4 basis points half on half to 2.12%.

Should you invest?

Whilst my preference remains Australia and New Zealand Banking Group (ASX: ANZ), if Westpac delivers a result in line with expectations then I think it would be a good option for investors looking for exposure to the banking sector.

Especially if it holds firm with its 94 cents per share interim dividend. This will mean its shares offer a trailing fully franked 6.9% dividend yield.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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