Westpac Banking Corp (ASX: WBC) is in the headlines today after announcing that it was committing to its New Zealand banking division.
What did Westpac say?
The major ASX bank announced it is going to retain its complete ownership of Westpac New Zealand and will not proceed with a demerger of that business.
Right now, the Westpac New Zealand priority is to finalise the appointment of a new CEO to replace David McLean who will retire on 25 June 2021.
The Westpac Group CEO Peter King said: “After a detailed review, we believe a demerger of the WNZL business would not be in the best interests of shareholders. Our review identified opportunities to improve services for customers and value across the WNZL business and we will progress these with the WNZL Board and management team.
“WNZL is a strong business that has been serving New Zealand for 160 years. We remain committed to delivering for customers and fulfilling our purpose of helping Australians and New Zealanders succeed.”
Could the Westpac share price be an opportunity?
Over the last six months the Westpac share price has risen by 33%. That’s a pretty solid performance. But I think that the full recovery is now (more than) priced in.
The Westpac share price is currently higher than it was just before the COVID-19 crash.
Westpac recently released its FY21 first half result. Cash earnings jumped 256% to $3.54 billion and statutory net profit went up 189%. Cash profit / earnings per share (EPS) more than tripled to 97 cents. Excluding ‘notable items‘, cash earnings rose 60% to $3.82 billion.
Whilst that recovery was strong, I’m not convinced that it can generate significantly higher earnings in the medium-term from here. The only thing that’s going to get better (compared to COVID results) over the next year or two, in my opinion, is the payment of bigger dividends.
Using CommSec numbers, the Westpac share price is valued at 14 times the estimated earnings for the 2021 financial year with a projected fully franked dividend yield of 4.4% for this year.
Before thinking about Westpac, you can click on this link to ASX dividend shares to find plenty of stock ideas.
