Is the Westpac Banking Corp (ASX: WBC
) share price a buy after giving its June 2019 quarter update?
Westpac Banking Corporation, more commonly known as Westpac, is one of Australia’s ‘Big Four’ banks and a financial-services provider headquartered in Sydney. It is one of Australia’s largest lenders to homeowners, investors, individuals (via credit cards and personal loans) and business. Its name is a portmanteau of “Western” and “Pacific”.
Westpac’s June 2019 Quarter
Westpac reported that its common equity Tier 1 (CET1) capital ratio was 10.5% at 30 June 2019, which fell from 10.7% at 31 March 2019, but rose from 10.2% at 30 June 2018.
Westpac’s credit risk RWA (risk weighted assets) increased by $3.9 billion, thanks to mortgage growth and changes to credit quality. Total RWA increased by $2.3 billion, or 0.6%.
The major bank’s liquidity coverage ratio (LCR) at 30 June 2019 was 128%, at 31 March 2019 it was 138%.
But, perhaps the biggest part of the update was the impaired and past due loans section. The ‘defaulted not impaired’ increased by 12.8% over the quarter to $5.1 billion at 30 June 2019 from $4.5 billion at 31 March 2019. Impaired loans also increased by 7% over the quarter to $1.87 billion.
Is The Westpac Share Price A Buy?
It’s not a good sign that Westpac’s troublesome loans are continuing to grow. I think we have to see what the stats look like at 30 September 2019 before saying it’s getting too bad. Don’t forget, the RBA recently cut interest rates twice to 1%, so this may help borrowers in the shorter term.
Media sources are reporting the the auction clearance rates in Sydney and Melbourne are doing better than they were at the start of the year. It’s still early to call it a sustained recovery, the key spring selling season will show whether it was just because of the low volume of property sales and RBA & APRA actions that caused a short term bounce.
Westpac currently has a fully franked dividend yield of 6.7%, which I think is the best feature of the bank to investors at the moment. Low growth isn’t an attractive feature for long term returns, which is why I’d rather invest in the reliable shares in the FREE report below instead.
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