Westpac has delivered an underwhelming result. FY cash profit was up 3% to $8.062bn under a consensus expectations for $8.162bn. The focus this earnings season was on compensating customers who had claims that were denied and others who did not receive discounts. The bank not only admitted to these legacy issues but is taking the appropriate steps to ensure it put things right with disadvantaged customers. Here are some of the key points: Cash earnings per share 239.7 cents, up 2% Cash return on equity (ROE) 13.8%, within target range Unchanged final fully franked dividend of 94 cents per share (Full year dividend of 188 cents per share, unchanged) Common equity Tier 1 capital ratio of 10.6% Bank Levy $95 million (pre-tax) Net interest margin (NIM) in the second half, over the year fell 4 basis points to 2.09%. Total loan growth was 3% driven mainly by the mortgage market which experienced 6%. The Government’s bank levy took a rather large bite out of the Bank’s bottom line. Whilst ANZ and NAB are taking on massive cost cutting drives, WBC avoided any significant restructure. Softer conditions in the housing market are expected but the number of its bad and doubtful debts was low. CEO Brian Hartzer said “We remain positive about the Australian housing market, although we expect price growth to moderate through 2018.” The focus of this set of results is all about the customer whereas NAB was all about innovation. As part of the bank’s “get it right, put it right’ programme that reviewed its products and services it found multiple issues. WBC is determined to ensure that no customer has been disadvantaged from those past products. The cash earnings impact of these changes was $118m this year, equivalent to 1.5% of earnings. Unconventional View: Our assessment of WBC result is that it was not only disappointing it was fraught with deep seated problems. Cash earnings missed consensus forecasts and highlighted softer underlying profit trends. NIM was lower it fell by 4bps to 2.03% partly due to the bank levy which equates to 2c a share. But the SA Government state’s $370m bank…

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