WBC - Westpac Banking Corporation

[notting]

If your in for the long term One thing that is also interesting is that if you look at a monthly chart, it has never dipped below the oversold 20 line in a slow stochastic three times in a row before heading up to overbaught 80.
It double dipped during GFC part 1 (which was a first) and has just double dipped again over Christmas and has started to climb out but is back tracking just at the moment.

I interperate that as a long term probability buy because it's never tripple dipped on the slow stochastic monthly.

 

[notting]

That last post is bugging me.
You could have said it had never double dipped up to the GFC there for would not then.
If we are the new Japan, the lost decade is still in it's early sages.
The size of the debts would make you think so.
No rush I guess!
Buff would he has B of A.!

 

[nulla nulla]

Three days of interesting news;

1. A tick of approval from the IMF for the strength of our local banks tempered with a word of caution about exposure to domestic mortgages and small business loans;
2. The "State of the Union" address by Barrak Obahma and the report of the U.S Fed that their interest rates would stay low until late 2014;
3. The inflation report being lower than expected suggesting that the Reserve Bank would drop interest rates by another 25 points on 9 February 2012 (with the possibility of another rate cut in March if banks don't pass on the full cut in February); and
4. The probability that the big 4 banks won't pass on the full rate cut in February (and March) maintaining their profit margins.



And the banks led by Westpac had an early Australia Day celebration. At $21.43 wbc was up 4% for the day. Closing on $21.30 wbc finished the day up 3.5% on the previous days close. The chart shows wbc edging closer to the top edge of the longer term downtrend channel. If it can break through the $21.50 level the next resistance points are $21.80 then $23.10.

The downside is a reversal within the pennant to retest the lower levels of $20.00.

 

[nulla nulla]

Holding for the break out above $21.20 finaly paid off with wbc testing $21.59 before the Greek debacle (and riots) pulled the finance sector back. Re-entry for short term trades between $20.82 and $21.23 (quick in and out, no confidence in holding until the Greek bailout funds are finaly released).

Then the market took a negative view of the first quarter result. Due to an impairment of $200m wbc, only acheived a quarterly profit of $1.5 billion instead of $1.55 billion. The market reacted with a vengence and pushed the share price down to $20.02 (re-entry for all those punters looking for the low $20's?).



Having broken through the lower channel line it will be interesting to see whether wbc can bounce from this level or will continue to fall. Wierd reaction in my opinion. Still on track for a profit in excess of $6 billion, paying a fully franked dividend which equates close to a 10% yield and the market is trying to push the price down to sub gfc levels.
Go figure, eh.

 

[notting]

It is a a little imponderable. It tends to lag a bit then bounce hard to catch the others.
However it's been unduely spanked a few times rcently which is a little unerving. Market is trying to tell us something that we haven't figured, I guess.

CBAs price action leading into its dividend is also a concern but understandable after WBCs little miss. I don't like the look of the new guy running CBA. Hasn't got that stately quality and looks a little reactive.

If Euraland dissapoints, this Week could be a dark one.

 

[McLovin]

I got the WBC CPS prospectus this morning. There's an interesting chart showing the cost of the various convertible/hybrid notes WBC has issued. Back in 2006 the TPS securities were issued at a 1% margin above the 90 day BB. In 2008, just before things started to get really bad, they issued at 2.4% above 90 day rate. In 2009, when things were really bad, they issued at 3.80% above the 90 rate. The current offer is 3.25% above the 180 day rate. The spread on the 90/180 rate is about 10 basis points, so ~3.35% if they were using the 90 day rate. That gives a grossed up yield of about ~7.8%. When you consider what they are lending money at, times must be tough.

 

[skc]

I got the WBC CPS prospectus this morning. There's an interesting chart showing the cost of the various convertible/hybrid notes WBC has issued. Back in 2006 the TPS securities were issued at a 1% margin above the 90 day BB. In 2008, just before things started to get really bad, they issued at 2.4% above 90 day rate. In 2009, when things were really bad, they issued at 3.80% above the 90 rate. The current offer is 3.25% above the 180 day rate. The spread on the 90/180 rate is about 10 basis points, so ~3.35% if they were using the 90 day rate. That gives a grossed up yield of about ~7.8%. When you consider what they are lending money at, times must be tough.

Love these hybrids at the moment. "Equity-like risk coupled with debt-like return" was the best summary I've read.

 

[Knobby22]

I . That gives a grossed up yield of about ~7.8%. When you consider what they are lending money at, times must be tough.

Naah, this money is for personal loans, business loans etc.
I was talking to a banker last week and he said yields were good even better in the pacific. Said there was no real competition.

 

[McLovin]

Love these hybrids at the moment. "Equity-like risk coupled with debt-like return" was the best summary I've read.

Good summation really.

It's just a shame we don't have a corporate debt market like in the US. Instead we are stuck with these pigs wearing lipstick!

Naah, this money is for personal loans, business loans etc.
I was talking to a banker last week and he said yields were good even better in the pacific. Said there was no real competition.

Why not just raise straight up equity then, or debt, if it can done cheaper. I might have a dig around for the answer but I assume, for capital reserve requirements, this stuff is treated as equity?

 

[McLovin]

Good summation really.

When you think about it a bit more it's even more of a sucker product. Presumably, WBC is wanting to ensure it has good access to debt markets by making sure its Tier 1 Capital looks strong. Solution: Get some grey nomads in to buy something that is probably sold to them by their advisers as being "a bit more stable than the shares". All they are really doing is providing bondholders with additional security, without diluting common equity.

Maybe I'm being a bit too cynical.

 

[nulla nulla]

These products are aimed at the buy/hold set/forget investors. Investors trading the current volitilty wouldn't be interested in locking their capital in for a relatively low fixed income over such a long period.

 

[nulla nulla]

WBC has been steadily reducing the level of reliance on overseas funding, building up the Tier 1 liquidity through notes, convertable preferences etc. They continue to squeze their costs to protect their margins in a period of reducing loans and lower interest rates and they are on track to deliver another record profit.



The chart over the past year shows wbc has turned arround and presently appears to be tracking the bottom bar of an upward channel. Maybe it is viable for the long term holders looking for a run up back over $24.00+, maybe not. However the trade opportunities in the volitility are certainly there for the stout hearted or mad. As always dyor.

 

[blue0810]

These products are aimed at the buy/hold set/forget investors. Investors trading the current volitilty wouldn't be interested in locking their capital in for a relatively low fixed income over such a long period.

So many Hybrid/Notes has been offering at the moment .

The myth about mutant stocks- SMH2 6/02/1012
http://www.smh.com.au/money/investing/the-myth-about-mutant-stocks-20120225-1tuln.html

ASIC alert on hybrid issues by banks SMH 02/03/2012
http://www.smh.com.au/business/asic-alert-on-hybrid-issues-by-banks-20120301-1u5w3.html

 

[nulla nulla]

I thought todays drop flowing on from the Reserve Bank leaving interest rates on hold was an over-reaction. Stevens had already telegraphed his concerns about the two speed economy and advised you can't meddle with the whole economy to tighten the reins on one sector without impacting adversely on the other sector.
There was never going to be any change and this should have already been factored into the bank share prices. Right or wrong, I bought in at $20.62. If it drops low enough I will accumulate some more.

 

[nulla nulla]

The share price dropped lower and looked like it might be going to break out downwards on the delays and uncertainty of the Greek bailout. Then the bailout was approved and now the funds have started flowing into Greece (never mind the hair cuts some of the Greek Bond holders were forced to take).

WBC has now broken through the upper pennant level but has a long way to go to break above recent resistance levels at $21.40 then $22.00. Expect more volitility as the European focus shifts to Portugal and Italy. If wbc can't continue the upward run, don't be surprised to see a retrace to the $20.50 area



On the upside, wbc has been reducing its' reliance on overseas funding for mortgages, tightening lending policies and shifting jobs off-shore. The record profit margins appear to be being maintained by whatever means it takes.

 

[nulla nulla]

Since the low point in August 2011 wbc has tracked sideways and painfully slow upwards. Once again wbc is headbutting the resistance point of $21.40. This time, with the news that offshore funding has been getting lower for the last 6-8 weeks, there is more likelihood of an upward breakout.



The next resistance level is arround $21.75. It would not surpise me to see this passed as there is a dividend announcement due in May and the dividend punters will be starting to acquire, allowing for the 45 day holding rule to get the franking entitlement.

 

[nulla nulla]

Westpac broke through the resistance level of $21.47 last week but then spent three days head butting the $22.00 level. Just as the news was filtering into the market that the banks off shore funding is cheaper than they have been letting on, an analyst pops his head up and reminds everyone that the greek situation is far from resolved. All the green shoots in the U.S.A can't offset their trillions of dollars in deficit and the chinese economic growth rate is slowing to 8.5% (lol).



wbc appears to have broken out upwards from the long term pennant and is moving sideways and upwards in a new channel. Seems likely that wbc will continue to improve but at a rate close to that of drying paint and no doubt with plenty of volitilty.

 

[nulla nulla]

Since the end of March 2012 wbc has broken through the 6/12/2012 resistance level of $21.78 and last week challenged the 27/10/2011 resistance level of $23.10, hitting $23.08 before dropping back to close on Friday at $22.91.

The ever increasing billion dollar profit announcement this week exceeded analyst expectations, however the bigger profit, encouraging reprt from Ms Kelly and fully franked dividend of $0.82 cps were not enough to boost wbc above the $23.00 mark. Mind you the fact that wbc held on to the close of $22.91 on thursday and friday was encouraging given the market dropped 35 points on friday. Going forward wbc appears to be taking steps to protect the profit levels despite a challenging environment.



A word of caution for punters. The run up of wbc since the share price broke out of the sideways pennant on or about 12/03/2012 will roughly coincide with the 45 clear days requirement for investors to qualify for the franking cedit entitlement when the share goes exdiv on 14/05/2012 (where their cumulative franking credits are more than $5,000). After allowing for the div of $0.82 and the franking component their isn't a lot of fat in the share price movement since mid march.

Whether wbc can go any higher now before going exdiv will be interesting to see. No doubt wbc will dip after going ex-div however if wbc can rebound and break through the resistance level of $23.10, the next (recent) level of resistance is the peak of $25.60 of 27/04/2011. Now that would be good. LOL. As always do your own research.

 

[nulla nulla]

The wbc share price didn't go higher before going exdiv. In fact it peaked at $23.08 then dropped back to $22.72 before going exdiv. This was pretty good with the Gail Kelly press coverage offsetting some of the fallout from the French and Greek election headlines. The share price dropped back to $22.00 after going exdiv, then the french & greek elections fallout kicked and the share price along with the xao went into free fall. wbc closed yesterday on $21.41 after hitting $21.14 interday.



The XAO has fallen 10% in 12 trading days however the wbc share price (adjusted for the dividend and franking) has only fallen 6-7% (but did it in 5 trading days having held up for a week leading up to the exdiv date).

Resources have fallen harder and it would appear that, while some investors are panicking and getting out of the market, other investors are moving to the banks, telstra and some reits seeking comfort & security in the higher yields and lower p/e ratios.

Question is, will it bounce from here or are we going to see wbc test $18.50 and lower?

 

[nulla nulla]

Holders are probably thankful that the share price has not fallen to the September 2011 $18.60 lows. Recently there appears to be support for wbc arround the $20.00 mark with resistance arround the $20.80 level.



Personally I think it is stupid that wbc can get slapped down to a level where it has a yield of arround 11% (including franking) and continues to make record profits year in, year out. I admit it, I bought this week. Topped up my SMSF holding and Personal holding. If it dips again I will likely hold for a longer trade as, imo, the upside risk is better than the downside risk. From this point the share price has a buffer underwritten by the yield. As always d.y.o.r.