WBC - Westpac Banking Corporation

[tinhat]

Assuming the retrace is exhausted, I bought today. Not sure where the share price is going but attracted to the fundamentals and the yield. I think banks have been oversold.

 

[Nicks]

Bought sub $30 and happy with 6% + fully franked dividend.

 

[qldfrog]

Bought sub $30 and happy with 6% + fully franked dividend.

Great term deposit with no capital garantee, nor fixed return rate;
might buy the same at $25 in a fortnight if I feel like gambling.
Sorry Nicks not personal, but are the return worth the risks?
Leverage (aka banks) works both way and for a country in recession....

 

[shouldaindex]

It is basically a bet on recession or not in the next 12 months.

My guess would be about a 20% swing either way (so 40% all up) depending on outcome.

I'm more familiar with ANZ, it's @ $27 currently, so I'd ballpark $22 / $32.

 

[Nicks]

Great term deposit with no capital garantee, nor fixed return rate;
might buy the same at $25 in a fortnight if I feel like gambling.
Sorry Nicks not personal, but are the return worth the risks?
Leverage (aka banks) works both way and for a country in recession....

How did you go at $25?

Which country is in recession?

Show me a term deposit that pays such returns please.

Seriously sold out at $31.75 last week. Will buy in again sub $30.

 

[sptrawler]

Great term deposit with no capital garantee, nor fixed return rate;
might buy the same at $25 in a fortnight if I feel like gambling.
Sorry Nicks not personal, but are the return worth the risks?
Leverage (aka banks) works both way and for a country in recession....

If we go into recession (which I think is happening) where do you put your money?

The thing with the banks is, they get everyone's pay packet, every week.
They get to invest most peoples super contributions, every week.
They get every small to medium business takings, every week.

Who else has money being poured into them, every week, recession or not?

 

[sinner]

Who else has money being poured into them, every week, recession or not?

Aside from banks, consumer staples, realestate and energy is my guess.

But, thanks to 9% mandatory minimum super and default "balanced" funds, every week 9% of the nations wage productivity goes to the super funds who invest 60% of that into "blue chip stocks", i.e. ~5.4% of the nations wage productivity is being poured into ASX listed companies regardless of whether they perform well, or poorly, over or under valued.

 

[Vixs]

Aside from banks, consumer staples, realestate and energy is my guess.

But, thanks to 9% mandatory minimum super and default "balanced" funds, every week 9% of the nations wage productivity goes to the super funds who invest 60% of that into "blue chip stocks", i.e. ~5.4% of the nations wage productivity is being poured into ASX listed companies regardless of whether they perform well, or poorly, over or under valued.

Default options would also include international shares, infrastructure, property and alternative allocations such as private equity and hedge funds and small caps in their growth asset exposure. I'd imagine it's the industry funds, not the retail, that get the majority of those inflows though. Could be wrong, interested to find out.

 

[sptrawler]

Default options would also include international shares, infrastructure, property and alternative allocations such as private equity and hedge funds and small caps in their growth asset exposure. I'd imagine it's the industry funds, not the retail, that get the majority of those inflows though. Could be wrong, interested to find out.

Do the industry funds invest directly, or use default master trust funds?
Thereby reducing their responsibility and accountability, for outcomes?

 

[Vixs]

Do the industry funds invest directly, or use default master trust funds?
Thereby reducing their responsibility and accountability, for outcomes?

Many utilise fund managers with mandates for how the money is run, some have in-house managers and invest directly as they've obtained the scale to make it worthwhile. Many are also utilising index funds in a bid to lower costs.

With regards to reducing their responsibility and accountability for outcomes, ultimately they are the trustee and are responsible to their members for their outcomes, so how they manage the funds isn't really relevant on those points in my opinion.

Sorry, got a bit off topic from Westpac. If it's something you want to discuss further perhaps we should start a thread on that.

 

[kid hustlr]

Capital raising is a big discount to the SP.

Is this common?

http://www.smh.com.au/business/banking-and-finance/westpac-to-raise-35bn-cash-profit-up-3-per-cent-20151013-gk8f8q.html

 

[skyQuake]

Capital raising is a big discount to the SP.

Is this common?

http://www.smh.com.au/business/banking-and-finance/westpac-to-raise-35bn-cash-profit-up-3-per-cent-20151013-gk8f8q.html

Yep, its a rights issue not placement so its 'fair'.

CBA similar story.

 

[CanOz]

Here's a laymen question regarding capital raising...why can't the bank just use its profits to shore up the balance sheet? Why do they need to dilute shareholders value by raising equity? I understand that some profit will go out as divies...

CanOz

 

[skc]

Here's a laymen question regarding capital raising...why can't the bank just use its profits to shore up the balance sheet? Why do they need to dilute shareholders value by raising equity? I understand that some profit will go out as divies...

CanOz

Yes it's one of the ironies of the market. They can certainly skip a dividend payment or two to have the same impact on their balance sheet. Yet they'd never do it. I guess they are worried about the market's reaction if they ever cut dividend... but giving money out on one hand while asking for money on the other, does nothing more than paying handsome fees to the brokers and underwriters.

 

[CanOz]

Yes it's one of the ironies of the market. They can certainly skip a dividend payment or two to have the same impact on their balance sheet. Yet they'd never do it. I guess they are worried about the market's reaction if they ever cut dividend... but giving money out on one hand while asking for money on the other, does nothing more than paying handsome fees to the brokers and underwriters.

Thanks SKC, so i guess its the ole "Because they can..."

 

[oldblue]

Bank shares have become the "go to" securities for investors seeking income - term deposits and bonds don't do it any more. Bank boards are not prepared to risk the resultant re-rating of their shares if they cut dividends, hence issuing new capital is the lesser of two evils - or so they figure.

 

[Ves]

Thanks SKC, so i guess its the ole "Because they can..."

Bank execs have remuneration agreements that are heavily tilted towards Total Shareholder Return (TSR) over a set period, which obviously includes dividends. As a double whammy, cutting or stopping dividends, will probably hinder the share price performance, further reducing TSR for that period.

 

[tinhat]

Here's a laymen question regarding capital raising...why can't the bank just use its profits to shore up the balance sheet? Why do they need to dilute shareholders value by raising equity? I understand that some profit will go out as divies...

CanOz

These sort of anomalies are often explained by distortions create by taxation, which I believe is the case here. As suggested, these sort of stocks, which are perceived to be secure and offering a steady dividend stream,are very attractive to people such as SMSF superannuants and others who can redeem the full value of the imputation credits with the ATO.

Any company that is offering a dividend reinvestment plan is diluting its shareholders with a capital raising every six months. This is not much different. The offer is about the same value as the upcoming dividend.

 

[CanOz]

Thanks for the replies everyone, very insightful.

 

[coolcup]

The WBC entitlement offer website says that the online acceptance form will be available today. When I go to the site, there is no such thing available. Anyone else having this issue?