Westpac Replaces ANZ As Number One At Macquarie

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By Rudi Filapek-Vandyck

Banking analysts at Macquarie would advise investors remain Overweight banks for the near term as the margin prospects remain good. This is anticipated to change from the second half of 2007 onwards with the analysts expecting by then the full cost of increased competition is likely to hit sector margins. The same applies to what is believed to be “a gradual deterioration in credit quality”.

Having said this, Macquarie has made some changes in its order of preference for the majors while stressing the changes reflecting its view on a 12 month horizon. Westpac (WBC) is the new number one (from four) followed by, in order of preference, National Australia Bank (NAB), Commonwealth Bank of Australia (CBA), ANZ (ANZ), and finally St George Bank (SGB).

Why Westpac on top? According to Macquarie, the current discount vis-à-vis the rest of the sector plus a top of the pack dividend yield will limit any further underperformance from here.

ANZ, the previous top pick in the sector, has now fallen to position number four with the analysts noting its relative discount has shrunk to 2% from 9% over the past 12 months.

Macquarie upgraded Westpac to Outperform and ANZ to Neutral today.

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