WESTPAC BANKING CORPORATION
June 2015
Company background
Industry structure
Westpac Banking Corporation (WBC) is one of
Australasia's Big Four banks with origins dating back to
1817 as the Bank of New South Wales. It is now one of
the world's largest 100 banks, with c.A$700bn in assets
and 12.5 million customers.
The industry structure of the Australian banks remains in
a strong position. Threat of new entrants has reduced
and substitutes and customer bargaining power (outside
mortgages) appears limited. The industry’s historical
reliance on wholesale debt markets was a concern,
however in recent years this appears to have somewhat
abated due to increased deposits and reduced lending
growth. The sector is also currently enjoying below trend
bad debt experience.
WBC’s primary operations are in Australia, New
Zealand and the near Pacific, providing a broad range
of services including retail, business and institutional
banking. WBC operates a “portfolio of brands” model,
including Westpac Retail and Business Banking, St
George Bank, BT Financial Group, Westpac
Institutional Bank and Westpac New Zealand. WBC
launched another retail brand, the Bank of Melbourne,
in August 2011.
In 2008 WBC acquired St George Bank (the fifth-largest
Australian bank at the time) and now has the following
market shares in Australia: 25% of housing mortgages,
10% of the business market and 23% of household
deposits. The BT Financial Group has a 20% share of
Australian wealth platforms.
Westpac recently released their 1H15 result. The
company generated cash NPAT of $3,778m although
this was slightly below market expectations with interest
margins flat and costs increasing 1.7%. Asset quality
for the bank remains very strong.
Also in November 2014 WBC announced the
appointment of Brian Hartzer as the new Group CEO.
Mr Hartzer was previously the Chief Executive of
Westpac’s Australian Financial Services division.
Share price—total return
Business segments
Divisional Cash Earnings (A$m)
Westpac Retail & Business Bank
Westpac Institutional Bank
Saint George Bank
BT Financial Group
New Zealand
Other
Total
FY14
2,582
1,468
1,580
895
790
313
7,628
Investment fundamentals
130
Year to Sep ($m)
Revenue
Profit
EPS (cents)
P/E
DPS (cents)
Dividend Yield (Net)
ROE
120
Rebased to 100
The largest threat impacting the sector remains
regulation. In late 2014 Federal Treasurer Joe Hockey
released the Financial System Inquiry Report which
recommended a further strengthening in bank capital
positions. Further industry consultation will occur before
any policy decisions are made. Additional capital
requirements under Basel IV are also expected to be
announced over the next year. WBC remains well
placed to manage both the risks of funding and
regulation given their strong capital position.
110
100
90
80
FY 14
19937
7628
243.7
13.4x
182.0
5.56%
15.59%
FY 15
20479
7756
245.0
13.4x
187.0
5.71%
15.67%
FY 16
21635
8164
252.0
13.0x
191.0
5.84%
15.24%
NZ50G
ASX200G
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
70
WBC
Source: Devon/IRESS/Consensus Forecasts
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