WBC share price: 4 key metrics to consider

Core Viewpoint - The valuation of Westpac Banking Corp (WBC) shares is a critical aspect of successful investing, combining both qualitative and quantitative analysis to assess the company's financial health and market position. Group 1: Company Overview - Westpac is the second-largest of the Big Four Australian banks, primarily involved in financing homeowners, investors, and individuals through various financial products [2] - The bank also services business customers, indicating a diversified revenue stream within the Australian financial system [2] Group 2: Workplace Culture - A positive workplace culture is essential for long-term success, as it can lead to better retention of 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] Group 3: Profitability Metrics - The net interest margin (NIM) is a crucial 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 activities last year, highlighting the importance of lending in its revenue generation [7] Group 4: Return on Equity (ROE) - Westpac's return on equity (ROE) was 9.7%, exceeding the sector average of 9.35%, indicating effective use of shareholder equity to generate profits [8] Group 5: Capital Adequacy - The Common Equity Tier 1 (CET1) ratio for Westpac was 12.5%, which is above the sector average, reflecting a strong capital buffer to protect against financial instability [9] Group 6: Share Price Valuation - The dividend discount model (DDM) suggests an average valuation of WBC shares at $35.10, with an adjusted valuation based on forecast dividends at $34.05 [11] - Considering fully franked dividends, the 'fair value' prediction rises to $48.64, indicating that the shares may appear expensive under basic DDM but reasonable when accounting for franking credits [12]