"WBC FY12 result- ticks the boxes: Yesterday’s solid result was received well by the market, albeit enhanced by lower quality elements (treasury income +$110mn and performance fees ~$90mn). The result was in line with consensus (domestic pre-provision profit growth of 5% was higher than peers on a full year basis, though a touch behind NAB at 5.6%) notwithstanding these benefits, the reversal of which will create headwinds in FY13. The result also highlighted sector-leading capital position and provisioning coverage, combined with a material improvement in funding. However the stock has run hard into the result, and is now looking fully valued (trading ~5% discount to the average of ANZ and CBA’s FY13 P/E). The likelihood of credit quality deterioration if domestic conditions remain subdued has led us to increase our BDD forecast resulting in downgrades to earnings estimates of 0.7-1.4% in FY13-FY15. We expect to see the stock supported prior to going ex-dividend on 9 Nov beyond which we see the potential for investors to switch back into CBA as the chase for yield continues."
WBC Price at posting:
$25.48 Sentiment: None Disclosure: Not Held
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