Westpac share price on watch amid results, special dividend and $1b buyback

This banking giant is rewarding its shareholders handsomely this half.

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The Westpac Banking Corp (ASX: WBC) share price will be on watch this morning.

That's because the banking giant has just handed in its first-half report card for FY 2024.

Westpac share price on watch following half-year results

  • Net operating income down 4% to $10,590
  • Net interest margin down 7 basis points to 1.89%
  • Operating expenses up 8% to $5,395 million
  • Net profit before one-offs down 8% to $3,506 million
  • Net profit down 16% to $3,342 million
  • Fully franked interim dividend of 75 cents per share
  • Special fully franked dividend of 15 cents per share
  • Additional $1 billion share buyback

What happened during the half?

For the six months ended 31 March, Westpac reported a 4% year on year decline in net operating income to $10,590 million. This reflects flat net interest income of $9,127 million and a 23% decline in non-interest income to $1,463 million.

The company's Business & Wealth business was the star of the show during the six months. It reported a 7% increase in net profit to $1,143 million. Management advised that net loans rose 3% with business lending growing by 5% driven by the commercial property and agribusiness sectors.

The Institutional Bank business delivered a robust result, with profits falling a modest 3% to $689 million. Pre-provision profit grew 7% reflecting well-managed margins and loan growth of 10%.

Westpac's New Zealand business had a mixed half. Although its net profit was up 11% to NZ$477 million, this was due to lower impairment charges. Outside this, higher operating income from loan growth was more than offset by an increase in expenses from higher technology and onshoring costs. Net loans increased 3% supported by growth in mortgages and business lending.

Finally, the Australian Consumer business acted as a major drag on its performance during the half. Its net profit tumbled 32% year on year to $1,082 million. This reflects a 12% decline in operating income due mainly to price competition in mortgages. Net loans increased 5%, while deposits grew 9%. One positive, though, is that compared with the second half of FY 2023, Consumer net profit decreased only 3% as the impact of mortgage competition moderated.

This ultimately led to a group net profit before one-offs of $3,506 million for the first half of FY 2024. This represents an 8% decline on the prior corresponding period and a 1% fall on the second half of FY 2023. It compares favourably to the consensus estimate for earnings before one-offs of $3,446 million.

This profit decline couldn't stop the Westpac board from increasing its fully franked interim dividend by 7.1% to 75 cents per share. Nor did it stop the bank from rewarding its shareholders with a special fully franked dividend of 15 cents per share.

But it didn't stop there. Westpac also announced an additional $1 billion on-market share buyback.

Management commentary

Westpac's CEO, Peter King, was pleased with the half. Particularly given the difficult operating environment. He said:

This half, we've managed growth and margins in a disciplined way amid a slowing economy and competitive banking sector. Net profit after tax, excluding Notable Items, was down 1% for the half and 8% from the prior corresponding period. We grew our major Australian segments in a disciplined way with mortgages and deposits up 5% and business lending up 9% over the year.

The impact of competition on mortgage margins moderated this half. NIM excluding Notable Items was unchanged from the second half of 2023. We remain focused on improving service and are seeing the benefits of our investment over recent years.

Commenting on the bank's dividends, buyback, and outlook, King said:

Westpac's balance sheet is in good shape and with the momentum in our business, supports a special dividend of 15 cents per share fully franked and an increase in the buyback program of $1 billion to $2.5 billion. The interim dividend is 75 cents per share fully franked, up 5 cents per share or 7% on the 2023 interim dividend. Overall, I'm positive about the outlook and confident we will continue to deliver for customers.

The Westpac share price is up almost 22% over the last 12 months.

Motley Fool contributor James Mickleboro has positions in 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 Scott Phillips.

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