Friday, November 03, 2006

Westpac makes a 14% increase in profit

Westpac Banking Corporation Ltd has reported a 2005/06 annual profit, up 14%, result of $A3.07 billion. CEO David Morgan noted that they had been able to achieve the highest growth rate in lending among its competitors. He argued this was being accomplished without sacrificing margins, but analysts and investors remain somewhat unconvinced. Morgan said an accrual
mistake costing $A34m in its credit card business had accounted for four basis points of a decline in net interest margin from 2.45% to 2.29%.

A good sign was that the BT Financial Group wealth creation subsidiary improved its profit to $A339m.

Westpac Banking Corporation Ltd has been one of the better banks to invest within the last few years. At this point I do not know enough on which banks are offering value as they all appear to be overpriced on fundamental terms. Westpac included. The reason is that investors recognise the continued growth which has occured in all banks for the last decade. This means yu need to pay a premium to buy in. Sometimes ( and most of the time) this premium is justified. What we really need to do is monitor the banks and get in where they have a decline of 10% or more. Another way is to sell Puts at lower levels so that you are getting your 10% discount and be ready to purcashe if needed.

Good Luck Investing.

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