As July draws to a close, many investors will turn their attention to the August reporting season. If you own Westpac Banking Corp (ASX: WBC) shares, here are a few things to keeping an eye on next month.
What to watch in August for investors in Westpac shares
Westpac shares have been performing strongly in 2021. The bank’s share price has climbed 25.1% higher this year which is more than both National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group Ltd (ASX: ANZ).
The banks are naturally leveraged towards a post-COVID economic recovery. That’s because the vast majority of their risk-weighted assets are commercial or residential mortgages. For Westpac, as at 31 March 2021, that’s $138.0 billion (32.2%) in residential mortgages and $101.8 billion in corporate and business lending (23.7%).
Stability and growth mean more people doing well in the economy and, therefore, a higher likelihood of repayment for the bank. That means any signs of economic stability and/or growth in August should be good news for Westpac. The same is also true if we see signs in various ASX results that economic growth is waning — that may see Westpac shares slide lower.
There are a few key metrics that owners of Westpac shares should be watching. For one thing, the net interest margin (NIM) of Commonwealth Bank of Australia (ASX: CBA) when it releases its full-year results on 11 August 2021. The NIM is a measure of bank profitability, being the spread between interest earned and funding costs paid.
CBA is Australia’s largest bank, and any NIM compression would be looked at unfavourably by investors. It follows that if one big-four bank is reporting lower NIM, Westpac may be likely to do the same at its full-year result in November.
Westpac shareholders may also be keeping an eye on impairment levels across not only CBA but regional banks like Bendigo and Adelaide Bank Ltd (ASX: BEN). Higher impairments are never good news for a bank, but low impairment levels could put investors’ minds at ease over economic distress.
Owners of Westpac shares have a lot to watch in August. Even outside of the banks, other ASX results can provide a barometer for current spending habits and future expectations. The CBA result is one worth watching as well as Westpac’s own third-quarter update on 17 August.