Deutsche Bank upgrades WBC to buy

(17 February – Australia) Westpac Banking Corporation, Australia’s second-largest bank by market capitalisation, has been upgraded to a buy despite yesterday’s 3 percent fall in first-quarter cash earnings to A$1.55 billion.Deutsche Bank upgrades WBC to buy

(17 February – Australia) Westpac Banking Corporation, Australia’s second-largest bank by market capitalisation, has been upgraded to a buy despite yesterday’s 3 percent fall in first-quarter cash earnings to A$1.55 billion.

Deutsche Bank made the move today, upgrading the bank to a buy from neutral on its ‘compelling’ valuation and improving earnings momentum after its ‘strong’ first quarter 2011 result.

‘Strong improvements in the margin, good cost control, strong leverage to any lending recovery coupled with bad and doubtful debts improvements will drive cash earnings growth of 13 percent in full-year 2011, which is well above consensus forecasts of 6 percent,’ said analyst James Freeman.

‘As such with the risk to consensus earnings on the upside.’

Mr Freeman also said the bank’s margins would improve for several reasons, including New Zealand and Institutional margin improvements, less pressure on deposit pricing and lower wholesale funding requirements.

He said this could see Westpac’s margin increase by at least 2 basis points in full-year 2011.