4 best numbers to value WBC shares

Core Viewpoint - Westpac Banking Corp (WBC) shares are currently trading at approximately $38.51, and while they may appear expensive based on a basic Dividend Discount Model (DDM), they could represent reasonable value when considering franking credits and future dividend growth [1][12]. Company Overview - Westpac is the second-largest bank in Australia's Big Four, primarily involved in financing homeowners, investors, and individuals through various financial products [2]. - The bank also services business customers, playing a significant role in the Australian financial system [2]. Workplace Culture - A positive workplace culture is essential for long-term financial success, as it aids in retaining high-quality personnel [3]. - Westpac's overall workplace culture rating is 3.4 out of 5, which is above the ASX banking sector average of 3.1 [4]. Profitability Metrics - Net Interest Margin (NIM) is a critical measure of profitability for banks, with Westpac's NIM at 1.93%, outperforming the ASX major bank average of 1.78% [6]. - Westpac earned 87% of its total income from lending last year, highlighting the importance of NIM in its revenue generation [7]. Return on Equity - Westpac's Return on Equity (ROE) stands at 9.7%, exceeding the sector average of 9.35%, indicating effective profit generation relative to shareholder equity [8]. Capital Adequacy - The Common Equity Tier One (CET1) ratio for Westpac is 12.5%, which is better than the sector average, providing a solid capital buffer against financial instability [9]. Dividend Valuation - The total dividend for Westpac last year was $1.66, with projections suggesting a growth rate between 2% and 4% [10]. - Using the DDM, the estimated average valuation of WBC shares is $35.10, while an adjusted valuation based on expected future dividends is $34.05 [11]. - Considering franking credits, the 'fair value' projection for WBC shares rises to $48.64, indicating potential value for investors [11].