Westpac (WBC) Update

Westpac (WBC) has been maintained as Macquarie Research Equities (An Australian market analyst) preferred Australian bank stock play.

Westpac (WBC): What will West Pack?

Westpac (WBC), one of Australia’s leading banks, will release their interim earnings report this Thursday. The much anticipated result will provide further insight into the impacts of the global credit crunch. Macquarie Research Equities (MRE) rates WBC as their standout pick in the banking sector and feels that the company should be well placed to manage the impact of ongoing liquidity concerns from both an earnings and funding perspective. The report, if positive, should renew sentiment around the pliability of the Australian banks. It is interesting to note that since the 18th April, WBC shares have rallied circa 11%, wishful thinking perhaps or is the market trying to tell us something?...

As mentioned in this morning’s piece, the upcoming week will see the release of key US economic data. This data will reveal whether the monetary tools utilised by the US Federal Reserve have been effective in curtailing some on the liquidity concerns plaguing global markets over recent periods. Any positive reports on the US financial system, therefore, are likely to transpire into further prosperity down under.

To recap the investor update provided by WBC in early February there were a number of positive factors supporting a reasonably sound report this Thursday. For example, WBC reported that they were able to raise $12bn to date in FY08 which represents around 40% of its FY08 wholesale funding plan. Furthermore, MRE reported that WBC currently holds considerably more liquidity than usual. Current liquid assets are at $30bn, about twice the size of liquid assets that the bank would typically hold. This should be a sufficient level to cover all offshore short-term costs for the next 6 months.

What the market has seen to date is the ability of key Australian banks, particularly WBC, to raise required funding to meet both term debt maturing and new business requirements. Investors, therefore, will be interested in any impairment adjustments that WBC may release this coming Thursday – ANZ a recent casualty to such costs. In closing, MRE have maintained WBC as their pick-of-the-banks for some time and feel that the firm will be well placed to manage the impact of the ongoing liquidity crunch.