Huntleys' Stock of the Week

Recommendations: Buy

WBC's current stock prices

Dividend reduction a certainty

Investment Rating:

WBC is Australia's oldest bank and operates a sound banking franchise in Australia and New Zealand with a balanced exposure to both the retail, corporate and institutional sectors. Aggressive expansion via acquisition in the wealth management area has complemented banking activities transforming WBC into a solid financial services house. Management is sound with a strong focus on existing businesses and capital management. WBC has been a strong performer within its peer group over the past decade with the most conservative but improving payout ratio.

Event:

• Dividend cuts by ANZ and National Australia Bank.

Impact:

• We reduce our dividend expectations in line with the proposed 25% cuts already announced by ANZ and National Australia Bank. It will be difficult for WBC not to fall into line as no bank is immune to the deteriorating environment.

• A cut in FY09 dividend equal to our estimate would boost scarce capital by over $900m which would be very useful at this juncture.

• The payout ratio would fall to 63% based on our earnings estimates.

• SGB's exposure to the commercial property sector is of concern as well as above average exposure to the SME segment

• No change in Fair Value or price triggers.

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@ Copyright Huntleys' Investment Information Pty. Limited (HII), a wholly owned subsidiary of Aspect Huntley Pty Limited), 2004. All rights reserved. Australian Financial Services Licence no. 240892. No material may be reproduced, except as allowed by the Copyright Act, without the prior written approval of HII. Some of the material provided by HII is copyright and is published under licence from ASX Operations Pty Limited ACN 004 523 782 ("ASXO"). Consensus forecast data is copyright Thomson Financial DISCLAIMER: While the above-mentioned advice and information are based on information, which HII consider reliable, its accuracy and completeness cannot be guaranteed. This report is made without consideration of any specific clients investment objectives, financial situation or particular needs. Those acting upon such information do so entirely at their own risk. For a copy of HII's Financial Services Guide please go to http://www.aspecthuntley.com.au/FSG or phone HII on (02) 9256 8000 to request a copy. DISCLOSURE: The directors and associated persons or entities of HII may have an interest in the securities discussed in this report.