The composition of earnings in the second half disappointed Morgan Stanley. The broker suspects a meaningful turnaround in franchise performance and operating earnings is unlikely in FY21.
The broker suspects, recently, Westpac has found it more difficult to manage costs compared with peers. The broker is factoring in some recovery in non-interest income.
Despite the CEO being “very pleased” with the CET1 ratio of 11.1%, Morgan Stanley suggests the ongoing capital build will weigh on dividend prospects.
Equal-weight rating retained. Target is reduced to $17.00 from $17.50. Industry view: In-line.
Target price is $17.00.Current Price is $17.89. Difference: ($0.89) – (brackets indicate current price is over target). If WBC meets the Morgan Stanley target it will return approximately -5% (excluding dividends, fees and charges – negative figures indicate an expected loss).