The Westpac Banking Corp (ASX: WBC) share price outlook is looking better after an update from Fitch.
What’s happening with the Westpac share price?
Looking at the Westpac share price, it has gone up by 33% over the last six months and 55% during the last year as the major bank recovered from the coronavirus crash.
The banking sector is recovering from that difficult period. It was after the news of the effectiveness of the COVID-19 vaccines in November where the banking sector got a particularly big boost.
Today’s boost
Westpac shares got another boost today after the bank noted that Fitch Ratings has today revised the outlook for Westpac’s long term issuer default rating to stable from negative.
The bank stated:
“The change in ratings outlook reflects Fitch’s view of the improved economic prospects in Australia. Fitch has affirmed Westpac Banking Corporation’s long-term issuer credit ratings at ‘A+’ and ‘F1’ for short term. Ratings in senior debt, subordinated debt and hybrid tier 1 capital instruments issued by Westpac Banking Corporation also remain unchanged.”
The bullish pitch for the Westpac share price
I’m generally not a bull regarding bank shares, but there are certainly positive points that can be said about the big four banks.
One point, as Fitch pointed out, is that the economic picture for Westpac now looks much better than it did last year. The number of loan deferrals has dramatically reduced and most have started repaying. That’s good news. Profit is recovering.
The property market’s strength is useful for the banks. It reduces the chance of bad debts and the banks are seeing enormous demand for loans.
Shareholders can probably expect higher dividend payments this year as the need to hold onto elevated levels of capital reduces.
There’s also the prospect of higher interest rates on the horizon. This could help banks earn a higher net interest margin (NIM) on the money lend out.
My take
I certainly believe things are looking a lot better for Westpac than it did in 2020. However, the Westpac share price has recovered that lost ground and I’m not sure how much more the share price can increase from here. But the dividends are likely to keep rising, which is a good sign for long term investors.
But there may be some ASX dividend shares that are able to deliver more compound profit growth beyond FY21.
