Morningstar

Morningstar, Inc.

Equity Bottom-Up

The Australian Prudential Regulation Authority’s, or APRA’s, new capital guidelines released on June 12, 2019 contained no major surprises. A key highlight was the proposal to hold slightly more capital for high-risk loans (interest-only and investment property loans) relative to low-risk loans (owner occupied, principal and interest loans). Currently, all mortgages have the same capital requirements irrespective of their levels of risk. While due to come into effect until Jan. 1, 2022, we think…

Worryingly, private credit system growth continues to slow with the Reserve Bank of Australia, or RBA’s, print of 3.7% for the year to April 2019 the weakest since October 2013. The RBA data includes all banks and non-bank lenders. Housing credit growth continues its downward slide with year-on-year growth of 3.9%, with owner-occupier growth a solid 5.5% offset by weak investor lending growth of just 0.6%. Business credit growth is holding around 4.5% levels and personal credit growth remains…

Wide-moat-rated Westpac Banking Corporation’s first-half fiscal 2019 cash profit of AUD 3.30 billion disappointed despite announcing AUD 753 million aftertax in one-off remediation and restructuring costs. Cash earnings fell 22% including the one-off costs but if excluded, the interim profit of AUD 4.05 billion was 5% lower than a year ago and only 1% lower than second-half fiscal 2018. Customer remediation costs and refunds dominate the messy result, but softer underlying business conditions…

Wide-moat-rated Westpac Banking Corporation announced another AUD 357 million in aftertax provisions for customer remediation costs and related refunds for clients of the bank’s authorised financial advice representatives between 2008 and 2018. This is in addition to the AUD 260 million of costs and provisions announced on March 25, 2019 covering Westpac’s in-house, salaried financial advisors
Our fiscal 2019 forecast cash profit declines to AUD 7.5 billion from AUD 7.8 billion previously as a…

Australia

Westpac Banking Corporation offers general and savings banking services.  The Company provides investment portfolio management and advice, insurance services,  consumer finance, and money market services among other services.  Westpac Banking Corp. serves individuals, businesses, and corporations worldwide.