Westpac (ASX: WBC) share price jumped to the highest level since August 1st after the company published strong financial results. The stock jumped to a high of $A22.35, which was up by almost 10% from the lowest point this year. Other Australian bank stocks like ANZ and CBA also jumped.
Westpac financials and buybacksWestpac, one of Australia’s big 4 banks, was in the spotlight on Monday morning after the company published strong financial results. The stock also jumped after the ongoing improving relationship between Australia and China.
In a report, the company said that its net profit jumped to over $7.19 billion in the financial year that ended in September. It jumped by 26% from the same period in 2022. This trend happened as the company benefited from high-interest rates in Australia.
Its total loans jumped by 5% to $773 billion while the Return on Equity (RoE) jumped to $10.1. As a result, the company decided to raise its total dividend to 142 cents, up by 14% from the previous year. It also announced a new $1.5 billion share buyback program.
Banks benefit from high-interest rates because they increase their net interest income, commonly known as NII. In Westpac’s case, NII jumped by 7% to over $18 billion. Non-interest income jumped to over $3.3 billion.
However, higher rates have some negative consequences such as deposit flight as customers move to the high-yielding assets like money market funds.
They also have a negative impact on the economy, which in turn leads to higher delinquency rates. Westpac’s impairment charges jumped to over $648 million.
Meanwhile, Westpac and other Australian shares jumped after China and Australia worked to improve their relationship. China has already removed bans on Australia’s products like coal, iron ore, and barley. This is a positive sign since China is the biggest buyer of Australia’s goods and services.
The next key catalyst for the Westpac share price will be Tuesday’s Reserve Bank of Australia (RBA) interest rate decision. Economists expect the RBA to buck the trend set by the Federal Reserve and Bank of England. They see the bank hiking rates by 0.25% to 4.35%.
Westpac share price forecast
The daily chart shows that the WPC stock price has moved sideways in the past few months. It has remained between the key support level at $20.27 and resistance at $22.45. The shares have moved slightly above the 50-day and 25-day Exponential moving averages.
A closer look shows that it has formed up gaps in the past three straight days and is nearing the resistance at $22.45. Therefore, the outlook for the stock is neutral for now. More upside will be confirmed if the price moves above the YTD high of $22.45.
If this happens, the next important resistance point to watch will be at $23.36, the highest point this year. The alternative scenario is where the shares retest the resistance at $23.36 and then resume the bearish trend to retest the support at $20.
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