The Westpac Banking Corp (ASX: WBC) share price is in focus after the ASX bank share reported net profit of $1.8 billion.
Westpac FY24 Q3 result
Westpac has reported how it performed in the three months to June 2024.
The ASX bank share generated $1.8 billion of net profit, which was 6% higher than the FY24 first-half average, and up 2% excluding ‘notable’ items.
Impressively, the business reported its net interest margin (NIM) increased 3 basis points (0.03%) to 1.92%, while the core NIM (excluding notable items and treasury & markets) improved 2 basis points (0.02%) to 1.82%. This tells us how profitable Westpac’s lending is (while taking into account the cost of the loan funding). The core NIM benefited from higher earnings on capital and hedged deposits.
Westpac attributed this result to its “consistent focus on customer service”, it grew the business while maintaining a “strong financial position”. The bank said a slight decline in pre-provision profit was more than offset by a reduction in impairment charges. Impairment charges were 4 basis points (0.04%) of average loans, down from 9 basis points (0.09%), reflecting an “improved economic outlook”. I think the level of impairment charges will be key for profitability and the Westpac share price in the next couple of years.
Looking at its operating performance, customer deposits grew to $15.4 billion and loans grew to $14.7 billion. There was Australian household deposit growth of 3% and housing loan growth of 8% which outperformed the Australian loan system.
Expenses increased by 2% due to higher investment spend which is weighted in the second half of 2024, along with ongoing inflationary pressures, particularly in technology services.
The bank noted it was joint leader manager on the first issuance under the Australian government green bond framework, a $7 billion 10-year sovereign green bond.
Financial strength of the bank
Westpac said it continues to “prioritise financial strength with capital, funding and liquidity well above regulatory minimums.” It had a CET1 capital ratio of 12% at 30 June 2024, above the target operating range of 11% to 11.5%.
However, the ASX bank share warned the “cost of living and high interest rates remain a challenge for some customers while many businesses are facing cost pressures and experiencing lower demand.”
Credit impairment provisions were $5.1 billion at 30 June 2024, $1.6 billion above expected losses of the base case economic scenario.
The bank has completed 60% of the previously-announced $2.5 billion share buyback.
Final thoughts on the Westpac share price
At the pre-open price, the Westpac share price had risen by close to 30% in 2024 and it was up by 44% over the past year.
I wouldn’t call Westpac shares a great value buy now after its strong rally over the last year. But, it is performing better than I expected, though its underlying (pre-provision) profit is essentially flat.
There are plenty of other ASX dividend shares I’d rather buy first.
