"Bleak" Westpac update priced in: Citi
Citi's Brendan Sproules argues that while Westpac is due to hold a conference call for its quarterly update on Thursday, pointing to further franchise weakness, after a challenging FY21 result in November, this is already priced in.
"We are expecting a relatively bleak update, forecasting core profit to decline by about 9% versus the 2H21 quarterly average and consensus of minus 5%, albeit ameliorated by a lower quality bad & doubtful debts beat," he says.
"However, we would contend that expectations from both the buy and sell-side have reached a bottom."
Westpac shares underperformed other major banks by about 7% over the past three months, while cash profit expectations "appear to have bottomed" at about $1.4bn for the quarter.
"While we are not expecting a meaningful improvement in fundamentals in 2022, we do expect an improvement in expectations management, which would see the stock screening cheap at 1x book in an inflationary environment," Mr Sproules adds,
WBC Price at posting:
$20.40 Sentiment: Buy Disclosure: Held
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