Westpac (ASX:WBC) share price sinks 6% despite doubling cash earnings

This banking giant's shares are sinking on Monday…

| More on:
A woman sits with her hands covering her eyes while lifting her spectacles sitting at a computer on a desk in an office setting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Westpac Banking Corp (ASX: WBC) share price has come under significant pressure on Monday.

In morning trade, the banking giant's shares are down over 6% to $24.10.

Why is the Westpac share price sinking?

Investors have been selling down the Westpac share price today after its full year results fell short of expectations.

In case you missed it, Australia's oldest bank reported a 138% increase in statutory net profit to $5,458 million and a 105% jump in cash earnings to $5,352 million. This allowed Westpac to declare a fully franked final dividend of 60 cents per share and announce a $3.5 billion off-market share buyback.

However, despite its cash earnings doubling in FY 2021, it was still short of the consensus estimate of $5.42 billion.

What else?

Also falling short of expectations and weighing on the Westpac share price was its off-market share buyback. While Westpac announced a significant $3.5 billion buyback, it was lower than the market was forecasting.

The team at Morgans, for example, were expecting Westpac to announce a buyback of $5 billion with its results, whereas Goldman Sachs was forecasting a $4 billion share buyback.

Goldman also notes that the bank's expenses and net interest margin (NIM) were disappointing.

It commented: "WBC's 2H21 NIM was down 10 bp hoh to 1.99% (1.98% ex notables) and was lower than our expectations (GSe, -6 bp to 2.03%)."

"On outlook, WBC notes that FY22 Margins are expected to be lower and highlighted exit margin ex. treasury & markets at 1.80% (1.87% Sep-21 half average)," the broker added.

As for expenses, Goldman said: "WBC 2H21 reported expenses were up 22% hoh, 5% higher than GSe. Excluding notable items, 2H21 expenses were up 9% hoh. WBC attributes most of the increase to higher staff expenses (+18%, +14% ex notables) due to the additional 1,396 FTE over the half on higher resourcing needs to improve risk management and compliance and to support customers impacted by hardship."

All in all, a disappointing result from the banking giant.

One positive, though, is that the Westpac share price is still up 23% in 2021 despite today's weakness.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Investor sitting in front of multiple screens watching share prices
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave the thumbs up to these ASX shares last week. Why are they bullish?

Read more »

Jessica Amir
Investing Strategies

6 ASX shares to buy and hold until the next leap year

These are the stocks to store in the portfolio until the next February 29 rolls around in 2028, according to…

Read more »

A woman ponders a question as she puts money into a piggy bank with a model plane and suitcase nearby.
Share Market News

If I invest $10,000 in Qantas shares, how much passive income will I receive in 2024?

Here's what analysts are predicting from the airline operator.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

These ASX 200 shares could rise 20% to 50%

Big returns could be on the cards according to analysts.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Value Investing

Looking for ASX value shares? Here's 1 I'd buy and 1 I'd avoid!

It's not an easy exercise to identify which stocks are undervalued and which ones are simply terrible. Here's an example…

Read more »

A young girl looks up and balances a pencil on her nose, while thinking about a decision she has to make.
Opinions

Will I be buying Zip shares now the company has turned a profit?

Is now the right time to buy this BNPL stock -- or not?

Read more »

a man with hands in pockets and a serious look on his face stares out of an office window onto a landscape of highrise office buildings in an urban landscape
Opinions

1 ASX dividend stock down 55% to buy right now

Here's why I think this beaten-up stock could be an opportunity.

Read more »

Three analysts look at tech options on a wall screen
Share Market News

Here's how the ASX 200 market sectors stacked up this week

ASX tech shares are on fire, leading the 11 market sectors for a third consecutive week.

Read more »