Westpac (ASX:WBC) announces $5.35b cash profit & $3.5b buy-back

Westpac (ASX:WBC) has recorded cash profit of $5.35 billion for the 2021 financial year and announced a $3.5 billion off market buy-back.

While cash profit did not meet expectations of $5.42 billion, it still rose 105 per cent from the prior year. Statutory net profit of $5.46 billion rose 138 per cent, while cash earnings per share of $1.46 cents rose 102 per cent from the prior year.

“Cash earnings rose, the balance sheet remains strong, and I am pleased with the progress we are making to transform Westpac into a simpler, stronger bank. Credit quality has remained remarkably good with stressed exposures continuing to decline off last year’s peak, while mortgage 90+ day delinquencies were also significantly lower,” said CEO Peter King.

“A turnaround in impairment charges and lower notable items were the main drivers of our improved earnings, while we also restored growth in mortgages and have begun to see better momentum in our institutional and business portfolios. While notable items were lower, they remain elevated as we continue to work on fixing our issues and simplifying our business.”

CET1 capital ratio of 12.32 per cent for the 2021 financial year, rose 119 basis points.

“Margins were down in a competitive, low-rate environment, and as we foreshadowed, costs were much higher in FY21. This was mainly due to an increase in our workforce to improve risk management and support higher business volumes, including Covid related assistance, as well as returning more than 1,000 jobs back to Australia.”

“Our underlying results are not where we want them to be, and we recognise we have more to do to become the high performing company we aspire to be.

“However, we are making progress in changing how the bank is run, including improving our culture and risk management systems, streamlining decision-making processes through lines of business, and streamlining our processes through digitisation.” 

The bank reported a fully franked final dividend of $0.60 cents per share, compared with its $0.31 cents dividend a year ago.

The board also announced an off-market buy-back of up to $3.5 billion of capital. According to Westpac, the board considered the improved economic outlook, higher earnings, and progress on its strategic priorities, particularly the completion of a number of divestments, which contribute to a strong capital position.

“Our improved operating performance and positive progress on our strategic priorities, including the completion of a number of divestments, have strengthened capital and allowed us to announce this buy-back. The board carefully evaluated several options and believes this is the most value-enhancing option to distribute part of the Group’s capital and franking credits,” said chairman John McFarlane.

The buy-back process will open on November 17. The bank said the buy-back enables a higher number of shares to be bought back in a shorter timeframe, reducing Westpac’s shares on issue, which will help support return on equity and other per share metrics for its shareholders.

Shares in Westpac (ASX:WBC) are trading 5.4 per cent lower at $24.29.