The Westpac Banking Corp (ASX: WBC) share price is in focus after announcing a profit hit of $1.3 billion in the second half of FY22.
Westpac is due to report its 2022 result on Monday, 7 November 2022. But, the big bank has already told investors today about some ‘notable’ items that will impact its profit for FY22.
FY22 profit hit
The items that I’m about to report on are going to impact its reported net profit after tax (NPAT) and cash earnings in the second half of FY22.
In total, the reduction is $1.3 billion after tax because of these notable items. The majority of these notable items have already been disclosed through announced divestments.
Westpac said that its second half will include a loss of $1.1 billion on the sale of Westpac Life Insurance Limited.
Expenses and revaluations associated with the sale of Advance Asset Management and successor funds transfer of BT’s personal and corporate superannuation funds will be included. This is $101 million after tax.
Next, it disclosed that there will be tax benefits from the sales of its motor vehicle and vendor finance businesses.
Westpac pointed to expenses and write-downs associated with reducing its corporate and branch footprint. This totals $129 million after tax.
Finally, there is an increase in provision for customer refunds, associated costs and litigation costs. This comes to a $68 million reduction after tax.
My thoughts on this news for the Westpac share price
Another financial year, another big hit to Westpac’s profit. While they may be described as ‘notable’, they still represent money lost/losses for investors. Profit hits mean less money for potential dividend payments.
I think that there is probably some value in Westpac shares considering interest rates are rising and this may well boost lending margins for the bank.
However, I also think that banks could see higher bad debts in future years if some borrowers struggle to make their payments with how high the interest rate has jumped.
While it may offer decent dividend income, I think there are other ASX dividend shares that may be able to provide stronger long-term growth.