MARKETS SPECTATOR: Market sells Westpac’s result

Analysts viewed Westpac's result positively, but the market has sold the bank's stock into early strength.

Sellers and profit takers have taken charge, choosing to ignore Westpac’s stronger-than-expected result and positive comments from brokers.

Cash earnings for 2012 of $6.6 billion beat consensus estimates of $6.46 billion and also topped the highest forecast too.

In a note, Credit Suisse said that the dividend per share of 0.84 cents was 1 per cent better than what it was expecting but in line with market forecasts. It also noted that compositionally, the 2012 pre-provision profit was in line with expectations, with revenues 1 per cent better, costs 1 per cent higher and lower-than-expected bad debts.

Credit Suisse also said that divisionally, earnings growth was broadly based. It didn’t give an earnings guidance statement, although Westpac does not expect a continued decline in stressed assets.

Goldman Sachs also viewed the result positively. It said pre-provision operating profit of $10.7 billion was ahead of its expectations by 1.6 per cent. With net interest margins and volume broadly in line with expectations, the better-than-expected result came from non-interest income – primarily driven by higher wealth income.

However, the market has ignored the positive result and chosen to sell into the early strength. Westpac managed to open up more than 1 per cent but quickly came under pressure as last week’s theme of profit taking among financials continued in earnest this morning.

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Source: Iress