Westpac Banking Corporation (ASX: WBC) – Share price sank on lower net interest margin

Westpac Banking Corporation
Modern metal Bank sign lettering fixed to a glass wall, with reflections in the glass.

Westpac’s share price tumbled in early trade as company announced fall in its net interest margin for the third quarter ending June 2018. Financial services group today revealed that its net interest margin for 3Q18 has reduced to 2.06% compared to 2.17% in 1H18, due to higher cost of getting funds and lower contribution from Group’s Treasury.

The Pillar 3 Report released 11 bp decline in the net interest margin (NIM) of the group, which governs the core revenue generation of the bank. This margin pressure is greatly attributable to sharp rise in bank bill swap rate (BBSW) which impacts group margin to decline by 1bp with every 5pb upside movement.

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In June quarter 2018, Westpac (ASX: WBC) recorded on average 24bps change in BBSW, moving upwards, compared to first half of 2018.

As the gap narrows between what the bank earns and what it pays to its lenders, Westpac’s stock dropped by 1.97% to $27.79 on 24 August 2018, 2:20 PM AEST.

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