Westpac Banking Corp (WBC)

Westpac Banking Corporation Overview

Westpac Banking Corporation, commonly referred to as ‘Westpac’ (ASX; ticker: WBC), is Australia’s longest-serving bank. Established in 1817 as the Bank of New South Wales, it rebranded to Westpac Banking Corporation in 1982. As one of Australia's ‘big four’ banks and the largest banking organisation in New Zealand, Westpac has a market value of A$118.89 billion and more than 40,000 employees across its global offices.

The bank’s core operations involve the provision of banking and financial services to household consumers and businesses across Australia, with Westpac Institutional Bank responsible for connecting clients and investors with global markets. Westpac and its competitors – Australia and New Zealand Banking Group (ticker: ANZ), Commonwealth Bank (ticker: CBA), and National Australia Bank (ticker: NAB) – control approximately 75% of household banking deposits and home loans in Australia.

Why Trade Westpac Banking Corporation (WBC) Shares?

According to the FY24 report (ending 30 September 2024), Westpac reported a net profit after tax (NPAT) of A$7.0 billion; although surpassing analysts’ expectations, this marked a 3% decline from FY23. Despite the drop in NPAT, the WBC Stock is up 7% this year and follows a robust rebound in 2024 that added more than 40%. While the company’s Share price is approaching all-time highs of A$39.75, resistance is being tested at A$35.32 (daily chart). Should price engulf said resistance, this could see more investors add WBC to their watchlists as follow-through buying may materialise towards the noted record high. However, analysts are mixed/cautious in their forecasts this year, with some desks anticipating flat earnings.

In the FY24 report, Peter King, Chief Executive Officer of Westpac, was optimistic and commented: ‘Our disciplined performance in FY24 has set Westpac up for growth and success. We’ve significantly improved our customer service, grown in key segments and delivered another financial result built on a solid balance sheet and capital position. We’ve continued to manage margins well in a competitive environment while growing in line with system in loans and deposits. The Consumer division built momentum in the second half and performance in Business has been a standout. Westpac’s capital position is one of the strongest I’ve seen, allowing us to further increase the Share buyback program by $1 billion. In addition, fully franked ordinary dividends increased by 6% this year with a final dividend of 76 cents per Share. Total ordinary dividends for the year were 151 cents per Share, towards the upper end of our payout range’.

What Influences the Price of WBC?

Like many companies operating in the banking sector, Westpac’s Share price is influenced by several internal and external drivers.

A key factor contributing to the company’s Share price volatility is its earnings results. The quarterly, half-year, and full-year earnings reports which may align with, exceed, or fall short of analysts’ estimates can impact the company's Share price. While investors pay attention to the company’s performance, focussing on metrics such as revenue and income, they also closely monitor the forward guidance, which can generate substantial volatility.

Unsurprisingly, economic conditions can also significantly affect Westpac’s Share price. An economy demonstrating growth (as per Gross Domestic Product), stable prices (inflation) and low unemployment can see increased demand for financial services, underpinning Westpac’s bottom line and Share price. On the other hand, an underperforming economy or one in a recession may adversely influence the bank’s performance and negatively impact its Share price.

News relayed by financial media and other widely recognised news outlets can also drive market sentiment and potentially influence the WBC Stock. For example, reports of new government initiatives that support bank lending can be viewed as positive by investors and drive the Share price higher; conversely, accounts of increased loan defaults could have an opposite effect and weigh on the Stock.

Additional risks to consider when trading banking Stocks like Westpac include interest-rate risk, credit risk, liquidity risk and market risk (systematic risk – recessions, political turmoil, natural disasters, and terrorist attacks).

How To Trade Westpac Banking Corporation (WBC) CFDs?

Although the WBC Stock is outperforming and may continue to rally if technical resistance is absorbed, analysts, as noted above, remain cautious. Before trading WBC Share CFDs, it is essential to conduct research, usually consisting of technical and fundamental analysis. If you are new to trading, consider visiting the FP Markets Academy, a dedicated resource that offers easy-to-follow articles and videos to help you learn more about trading in the financial markets.

CFDs, or ‘Contracts for Differences’, are well-known leveraged derivative instruments used for speculation and hedging across global financial markets. In addition to Westpac Share CFDs, investors can employ CFDs to invest/hedge in the foreign exchange market (Forex market), Commodities, Bonds, Exchange-Traded Funds (ETFs), Digital Currencies, etc. CFDs are structured as agreements between two parties to exchange the difference between a trading position’s opening and closing prices. Should the price of the underlying asset rise, the party with a long position (buy) would benefit and show an unrealised gain, and the party short (sell) would show an unrealised loss.

One of the key features of a CFD product is that it does not bestow ownership of an underlying asset, and all trades are cash-settled transactions. Another important aspect of CFDs is leverage. CFDs allow investors to increase their position size by more than their account equity through margin. For example, let’s assume Westpac is trading at A$100. Purchasing ten company Shares would set the investor back A$1,000, while trading CFDs with FP Markets would mean putting up 20% (initial margin) of this value (A$200) to trade an equivalent position size of ten Shares.