Westpac Result Leaves Analysts Up In The Air
The Age
Friday November 3, 2006
IN A week during which the economic impact of climate change has taken centre stage, the world's greenest bank struggled to impress investors with a record $3 billion profit that befuddled analysts.
In the six months to September 30, Westpac booked $1.6 billion net profit, up 1 per cent on the previous corresponding period and about $20 million better than a consensus of analysts that Bloomberg news service surveyed.Although the second half was 9 per cent better than the first on the bottom line, most of the 14 per cent year-on-year improvement was gained in the first half. The bank booked $1.5 billion in the six months to March 31 compared with $1.3 billion in the previous corresponding period. Westpac will pay a dividend of 60? a share on December 13 to shareholders registered at close of trade on November 22. The payout will bring the full-year dividend to a record $1.16."While this is not a great result, it is a very good result," said chief executive David Morgan.Dr Morgan, under whom the bank has topped its industry on the Dow Jones Sustainability Index for five years, said he struggled to make analysts recognise the bank's environmental leadership.Last week, a report commissioned by the British Government argued that the cost of doing nothing to stop global warming was greater than acting to cut carbon emissions."When you try and get analysts to put our sustainability record into the spreadsheet, their eyes glaze over," Dr Morgan said.But analysts were also confounded by the result's more traditional measures of business performance."I wish I could congratulate you on a great result, but to be honest, it's bloody hard to figure out what the result is," JPMorgan analyst Brian Johnson said to Dr Morgan at a briefing.Mr Johnson listed a litany of accounting changes from the bank's last announcement that could have affected the composition of earnings, and therefore the attractiveness of the bank's stock."A large part of the de-rating that Westpac has suffered has come down to the fact that no one can trust the numbers," he said. "The stock that reported the result today certainly was not the stock that was analysed at the first-half result."Westpac shares fell 21?, just under 1 per cent, to $23.80. The bank underperformed the S&P/ASX 200 sharemarket index by almost 50 per cent during the year while earnings per share grew 10 per cent to $1.67.Dr Morgan said he expected recent interest rate increases, along with another rise expected next week, to slow the credit market next year. The bank lent $111.5 billion in mortgages during the year, up 12 per cent on the previous year, along with $8.8 billion in credit cards and personal loans.Chief financial officer Phil Coffey said the bank's income came from different sources from half to half. A one-off jump in trading income had padded revenue in the first half, Mr Coffey said, while a $34 million accounting glitch had affected the second half.He said that with these events stripped out, the underlying revenue grew 7 per cent from half to half.ONLINE? See the Westpac result at theage.com.au/business'While our 2006 performance was sound, it was nevertheless below our potential.' -- DAVID MORGAN, Westpace CDO
© 2006 The Age
