Westpac Shares Reach New Heights: What’s Behind the Surge?

Westpac Banking Corp (ASX:WBC) is experiencing a notable rally in its share price, climbing to levels not seen in almost seven years. Yesterday, the share price of this major ASX 200 Index (ASX: XJO) bank ended the trading day at $32.79By early afternoon today, the shares had risen to $33.03, marking an increase of 0.7%.

While this may seem like a modest intraday rise, it represents a significant milestoneThe current share price brings Westpac, an ASX financial stock, closer to a new seven-year high, with the last comparable level dating back to November 2017At this price, Westpac boasts a market capitalization of $113.8 billion.

Over the past year, Westpac’s stock has surged by an impressive 52.2%For comparison, the ASX 200 Index itself has increased by 12.5% during the same periodThis strong performance highlights Westpac’s standout position among its peers.

Factors Behind Westpac's Strong Performance

The impressive gains in Westpac’s share price reflect a broader positive trend within the ASX 200 banking sectorDespite a challenging economic environment marked by high inflation and interest rates, Australian consumers and businesses have managed relatively well, with only a slight increase in bad loans.

Other major banks have also seen substantial gains: ANZ Group Holdings Ltd (ASX:ANZ) shares have risen by 20.9% over the past year, National Australia Bank Ltd (ASX:NAB) shares are up by 30.8%, and Commonwealth Bank of Australia (ASX:CBA) shares have climbed by 39.4%Nevertheless, Westpac’s 52.2% increase in share price leads the major Australian banks.

Additionally, the total value of Westpac’s shares, when including the $1.62 per share in fully franked dividends paid over the past year, has risen by 57.9% since this time last year.

Key Drivers of Investor Interest

Several factors have contributed to Westpac’s remarkable share price performanceStrong financial performance and rising dividends have played a significant role in attracting investor interestFurthermore, Westpac's share buyback program was recently increased by $1 billion, bringing the total buyback amount to $2.5 billion.

In its half-year results, Westpac reported a 4% decline in net operating income to $10.59 billion, and an 8% decrease in net profit before one-offs to $3.51 billionDespite these declines, investor confidence remained highWestpac’s CEO, Peter King—who will soon be succeeded by Anthony Miller—highlighted that net interest margins (NIM) had remained stable and that competition in the mortgage market had eased.

“The impact of competition on mortgage margins moderated this halfNIM excluding notable items was unchanged from the second half of 2023,” said King.

With these factors at play, Westpac’s share price closed the day up 2.7%, continuing its impressive run and reflecting the ongoing investor optimism surrounding the bank.