The objective of this report is to monitor and analyse the trading performance of Westpac Banking Corporation 3 weeks prior and three weeks after adjacent to its media release of its 2009 Profit Announcement for the year ending 4th November 2009. This data recorded will be used to calculate the effect that Westpac’s accounting announcement has on shareholders confidence, and the relationship between shareholder reactions and share performance. This report will also provide a detailed description of any changes that occur which may have some degree of influence on Westpac Bank’s share price. If found these feats will be graphed and held in comparison to leading competitors in the same field. Westpac Bank is one of the biggest banking corporations in Australia. Westpac provides a wide range of services including institutional and commercial banking, retail services and wealth management services in New Zealand and Australian markets. Westpac Bank was publicly listed on the stock exchange on July 18th 1970. Currently Westpac Bank has over … branches in Australia… Westpac Banking Corporation contends directly with Commonwealth Bank Australia (CBA) and Australian and New Zealand Banking Group Limited (ANZ) in its finance and banking industry. Westpac Bank is Australia’s oldest bank and holds a prestige reputation in the banking field. Westpac Banking Corporation also incorporates a number of acquisitions such as St. George Bank Bt Financial Group FOOTNOTE 1 Westpac Banking Corporation is a publicly listed company which trades on the Australian Securities Exchange (ASX).
On the 4th August 2009, Westpac Banking Corporation produced a profit announcement for the year ended the 30th of September 2009 FOOTNOTE 2. Westpac’s announcement included that of 3,446 million after tax, FOOTNOTE 3 which was released through to the general public by media release from Westpac whilst also reported in several newspapers. WBC. (2009). Westpac Banking Corporation-Investor Discussion Pack. Retrieved 13th February, 2009. From https://www.asx.com.au/asxpdf/20091104/pdf/31lv9gtdm46z5w.pdf WBC (2009). Westpac Banking Corporation-Westpac Investor Discussion Pack. Retrieved 13th February. 2009, from https://www.asx.com.au/asxpdf/20091104/pdf/31lv9gtdm46z5w.pdf WBC. (2009. 4th November 2009). Westpac 2009 Full year Result Announcement. 4th November 2009. 2009, from https://www.asx.com.au/asx/statistics/announcements.do?by=issuerId&issuerId=1361&timeframe=Y&year=2009 The announcement of 3,446 million after tax proved a very solid profit margin for Westpac’s financial year. A growth of 9% was recorded in the core earnings of according to the year 2009 comparison to 2008’s net profit. FOOTNOTE 4
Through examination of Westpac Banking Corporations share prices leading up to the 4th of November 2009 on the ASX (Australian Securities exchange) website, one possible situation was predicted and are as presented The share prices for Westpac Banking Corporation would see a dramatic increase due to restored confidence in the publicly listed company. The profit announcement of 3,446 million dollars for Westpac’s financial year ending September 30th 2009 would have created a sense of strength for investors of the company, for the decrease in stock prices over 2009 due to the depression generated loss of confidence throughout the market across the board. This immense profit in a struggling economy would almost guarantee a higher stock price.
Scrutiny of Westpac Banking Corporation’s stock performance showed a rapid and extensive increase in its overall closing share price. This is shown in Westpac’s cumulative residual (shown below in figure 1.1, Westpac Cumulative) which clearly shows a considerable increase once reached November 4. Westpac’s performance leading up to the November 4th profit announcement showed steady increases and decreases resulting in an overall increase over time. Westpac’s return in comparison to the market had been similar in the 3 weeks prior to November 4, however WBC. (2009). Westpac Banking Corporation-Full Year Results. Retrieved 13th February, 2009. From https://www.asx.com.au/asxpdf/20091104/pdf/31lv9gtdm46z5w.pdf as time advanced the bank gradually rose above the market. This substantial increase is unquestionably the result of the November 4th profit announcement of $ 3,446 million restoring confidence resulting in an improved volume and higher stock prices. Study of Westpac Banking Corporation’s competitors in the field including ANZ (Australia and New Zealand Banking) and CBA (Commonwealth Bank of Australia) over the period of 3 weeks prior and post of the November 4th profit announcement displayed no relation or mutual increase or decrease that could be related to an external influence. Cumulative residual graphs of ANZ and CBA show no sudden jump or increase post November 4. At WBA’s peak of 15% (shown below in figure 1.7, Cumulative Residual Comparisons), ANZ and CBA showed no common increase with CBA sitting on 2% and ANZ just short of 3%. These statistics shown prove that Westpac’s increase was not a result of an external influence that may have shown in ANZ and CBA’s figures and that of the profit announcement on the 4th of November.
If the possibility of an external influence was apparent, increases across the board throughout the banking field would be shown on the chart below (figure 1.8). WBC, CBA and ANZ banks returns have been charted in comparison to the return on the market index to seek out any similar patterns in relation to the immense increase of WBC profit announcement, resulting in an amplified share price.
The chart above displays an informative individual performance of each WBC, CBA and ANZ post to Westpac’s November 4th announcement in accordance to the market return at the same time period. It is therefore distinguished that Westpac Banking Corporation’s instant increase of 10% was a distinct reaction in accordance to the profit announcement. This therefore completely rules out any type of external influence that may have affected this sudden increase. No major changes to the Westpac Banking Corporation were announced on November 4th as well as the yearly profit announcement.
In this report limitations are inevitable and are important in data analysis and comparisons of all companies included. Westpac Banking Corporations announcement was taken from the ASX (Australian Stock Exchange) website, all announcements were preferred to be via newspaper articles, resulting in a more widespread user population.. This may have provided different data and a greater external reaction to the stock price at the time of the release. To gain a higher confidence that no external factors contributed to the profit announcement, resulting in a higher stock price, more than two companies would be needed to compare and give an informed conclusion. If an increased amount of companies operating in the same field were used in comparison this would create a much more credible conclusion. All information and data has been taken from the 3 weeks either side of the November 4 announcement. If a stronger argument was required a more extensive data collection would have been carried out.
Increases in share prices are evident throughout the stock market via a wide variety of factors. Positive profit announcements are major in the improvement of investor confidence and advancing companies credibility. Such increases and decreases of confidence in the stock market are possible through situations involving global or national depressions, interest rates, manufacturing policies, major market subsidiary, reactions to market variations etc. Westpac Banking Corporations $ 3,446 million dollar profit announcement is proved to be the definite catalyst in the rapid increase of share prices for Westpac Banking Corporation for the period adjacent to its release. Research into Commonwealth Bank Australia and Australian and New Zealand Banking proved no similarity in common increases relating to the specific time period, therefore proving that no external influence was present throughout the time of Westpac Banking Corporation’s November 4th announcement.
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