Portfolio Changes - Buy Westpac (WBC)

Change to Australian Equities Income Portfolio

Buy Westpac (WBC)

We have added Westpac Banking (WBC) to the Income Portfolio to gain exposure to well-capitalised domestic bank that is leveraged to improving housing and credit trends. National housing prices returned to all-time highs in April (+2.6% YoY) with construction and turnover also picking up from low levels. ALP’s housing policies appear supportive for demand, and expectations of further rate cuts are supporting housing sentiment and lending activities.

Westpac’s 1H25 result was broadly in line with expectations, underlying the bank’s operational resilience and capital strength. While cash earnings declined 1.4% YoY, largely due to lower trading income and increased operational investment, core operating trends remained steady. Credit quality remains sound, and Westpac continues to benefit from strong deposit growth across both consumer and business segments, with a robust deposit-to-loan ratio of 84%. Capital positions remain strong across the major banks.

Westpac’s CET1 ratio of 12.24% (pro forma 12.0% post-buyback) provides flexibility to support ongoing capital management initiatives, including the remaining $1.1bn share buyback. The fully franked interim dividend of 76 cents per share was maintained, representing a net dividend yield of 4.8% (6.8% fully franked), which adds near-term income to the portfolio.