Next week the Westpac Banking Corp (ASX: WBC) share price will be on watch when Australia's oldest bank becomes the latest big four bank to release its half-year results.
Ahead of the release on Monday 9 May, let's look at what the market is expecting.
What is the market expecting from Westpac's half-year results?
According to a note out of Goldman Sachs, for the six months ended 31 March, its analysts expect the banking giant to report cash earnings of $3,146 million. This will be an 11% decline on what the bank reported in the prior corresponding period.
This earnings decline is expected to be driven largely by a further deterioration in the bank's margins. Goldman explained:
"WBC reported 1Q22 NIM of 1.91%, down 8 bps from 1.99% in 2H21, while the ex-Markets NIM was down 16 bp to 1.71%. The fall was driven by: i) higher liquid assets, ii) competitive pressures in mortgage and business lending, iii) continued growth in lower spread fixed rate mortgages. We note that WBC's Dec-21 exit NIM (ex-Markets) was 1.67%, 4 bp lower than the 1Q22 average.
WBC expects NIM to decline further in FY22, while noting that its liquid build is expected to be largely completed by Mar-22. We are forecasting 1H22E NIM of 1.82% which is down 17bp vs 2H21 and will be keen to get confirmation that its liquid build has indeed reached a floor and any detail around leverage to higher cash rates."
What else should investors look out for?
Other key metrics that could have an impact on the Westpac share price include its dividend, CET1 ratio, and its expenses.
The latter is a major focus for investors given Westpac's bold cost reduction plans and the market's scepticism over it being able to deliver on targets. The broker said:
"Overall, the Group remains committed to its A$8bn cost target by FY24. We are forecasting 1H22E expense growth of -11% pcp and will be interested to get an update on how WBC is tracking against its recently announced cost reset plan and in particular its path to its A$8bn cost target."
As for dividends and its CET1 ratio, the broker has pencilled in a 60 cents per share fully franked dividend and a CET1 ratio of 11.62%.
