WBC - Westpac Banking Corporation

[tinhat]

I can't resist a market correction. I accumulated a few more WBC today for my Mum's pension account. 9% grossed up dividend yield. 41 days out from ex-dividend date. What can go wrong?

 

[sptrawler]

I can't resist a market correction. I accumulated a few more WBC today for my Mum's pension account. 9% grossed up dividend yield. 41 days out from ex-dividend date. What can go wrong?

12million traded today, so obviously some like you, took the opportunity.

 

[sptrawler]

It will be interesting to see if Westpac reduce their dividend, as NAB did, even if they did, at this price the return will still be attractive IMO.

 

[Knobby22]

I heard on the radio that the ATO is now saying you are only allowed one principal residence and any other such as a holiday house, even if you don't rent it has to be treated as an investment. (I thought this was the case anyway but it appears not)
This causes the banks to need more reserves which means they need to charge more the loan of this second property as they have more costs. Westpac is by far the largest lender for this sort of property (I don't know why) so they will be the bank most adversely affected.

 

[sptrawler]

I heard on the radio that the ATO is now saying you are only allowed one principal residence and any other such as a holiday house, even if you don't rent it has to be treated as an investment. (I thought this was the case anyway but it appears not)
This causes the banks to need more reserves which means they need to charge more the loan of this second property as they have more costs. Westpac is by far the largest lender for this sort of property (I don't know why) so they will be the bank most adversely affected.

Im with you on that, I thought thay was always the case, maybe the reporter stuffed it up, you can only have one ppr.

 

[Austwide]

I agree, one PPR is correct but I think there is or was a grace period of maybe 6 months to buy a new and sell your old PPR, maybe that has been stopped?

 

[sptrawler]

I agree, one PPR is correct but I think there is or was a grace period of maybe 6 months to buy a new and sell your old PPR, maybe that has been stopped?

It used to be 6 years, to enable teachers, nurses, police or others who had to move away for extended periods to keep the house as ppr for tax purposes.
But even then you are only allowed 1 ppr, if you bought another house in the town you were working, you couldn't claim ppr on both. One had to attract CGT.
Well that is my memory of it.

 

[greggles]

Terrible FY2019 results from WBC today.

Weakness virtually across the board. In a low growth, low inflation, low interest rate economic environment banks are going to struggle to make any real headway. The problem is, I don't think economic conditions are going to change in a hurry. We won't be seeing interest rate rises until we see real wage growth and we won't see that until we see real economic growth.

Banks are going to be stuck in the mud for a while, wheels spinning like crazy but just getting themselves deeper into the mire. When the US market eventually collapses conditions will even be worse. It's going to be a long, bumpy, painful road back to profit growth for the banks IMO.

 

[dyna]

Dismal return on equity,compared to overseas banks.All of the locals,including the big four are gonna have to cut their divs in coming years.Yet,with all the bad news,now pretty much out there, WBC will have no probs at all,in filling its book for the $2 billion placement.Instos will be tripping over themselves,in the rush.Little guys like me will cough up 30 grand for the $1/2 Bill SPP. Lazy investing for the top 20 shareholders.(and for me, too) The trick will be,to dump 'em down the track, before they do.For the longer term,there are better things than banks to invest in.

 

[bigdog]

The securities will remain in trading halt until the earlier of the commencement of normal trading on Wednesday, 6 November 2019 or when the announcement is released to the market.

ASX Announcement 4/11/2019 8:08:56 AM Westpac launches capital raising
Westpac shares are in a trading halt on Monday after the banking giant announced a $2.5 billion capital raising. These funds will be used to strengthen its balance sheet and improve its CET1 ratio.

The bank also released its full year results and revealed a 15% decline in profits. This led to Westpac cutting its final dividend down 15% to 80 cents per share.

During the period the bank reported a 16% decline in statutory net profit to $6,784 million and a 15% decline in cash earnings to $6,849 million.

The bank’s net interest margin tumbled 10 basis points to 2.12% and its return on equity fell 225 basis points to 10.75%.



15 ASX announcements today:

736

 

[bigdog]

As expected the market did not like yesterdays WBC announcements

Selling the bank’s shares on Tuesday follow the release of a soft full year result and the announcement of a $2.5 billion capital raising on Monday.

Westpac reported a 16% decline in statutory net profit to $6,784 million. Its cash earnings also fell hard, and were down 15% to $6,849 million.

A total of 79 million new shares have been placed with sophisticated and institutional investors at a price of $25.32 per share. This is a discount of 9.2% to its last close price. Though, these shares won’t be eligible for Westpac’s final 80 cents per share dividend.

Westpac will now push ahead with its non-underwritten share purchase plan to raise a further $500 million.

The issue price for the share purchase plan shares is a little more complex. It will be the lesser of the placement price and the VWAP of Westpac shares traded on the ASX during the five trading days up to, and including, the close date of December 2, less a 2% discount and rounded to the nearest cent.

845

 

[PZ99]

If Westpac are raising capital there's a fair chance the other banks will follow suit.

WBC getting it done now might play out better in the long run IMO.

SP back to where it was after the election - so not all bad.

 

[sptrawler]

Well I don't know how the Governments extra levy on Banks, is working out for them.

 

[peter2]

What's it going to take to make bank CEO's and their boards take the financial laws seriously.?
Fines aren't enough because the shareholders and customers end up paying for it.

Jail time and massive community service sentences must be considered.

 

[Sharkman]

What's it going to take to make bank CEO's and their boards take the financial laws seriously.?
Fines aren't enough because the shareholders and customers end up paying for it.

Jail time and massive community service sentences must be considered.

i don't know that it's a case of CEOs/boards not taking the laws seriously, they probably do. i think it's more to do with them not fostering the right culture/environment that encourages those things to be taken seriously. what i mean is that over the last decade or two, it seems to me that they've been giving direct revenue generating departments more and more leeway to "explore untapped opportunities", whereas non-revenue generating departments (which would include compliance) have been increasingly viewed as expenses to be minimised, rather than as an integral part of how they conduct business, and therefore bore the brunt of cutbacks.

i would guess that's what happened here, their compliance department has probably been getting systematically stripped of resources over the years and/or offshored, such that they had to cut corners and didn't have the capacity to monitor everything, and this sort of thing is the result.

another non-revenue generating department impacted by this would be technology. for tech startups and companies like Xero etc., technology is their revenue generating department, and they invest in it accordingly. but for the banks, it's increasingly getting viewed as a cost to be minimised as much as possible, not as a productive investment that can actually help their business.

so i doubt they've even given a look at fields like big data and machine learning (things that may well have helped detect breaches such as this). even if their technology leaders had said, hey i think this could really help us, their ideas probably would've been shot down by the board - nah, we don't have the budget for it, we already allocated it to our marketing department to tell people that financial planning is good for them!

i don't think it's a coincidence that the number of online banking outages seems to be going up and up. if departments/teams aren't given the resources to do their jobs properly, the quality of the output is going to suffer. no two ways about it.

 

[rederob]

I can't resist a market correction. I accumulated a few more WBC today for my Mum's pension account. 9% grossed up dividend yield. 41 days out from ex-dividend date. What can go wrong?

"The anti-money laundering regulator is accusing Westpac of failing to report more than 19.5 million international funds transfer instructions to it over a period of five years, for money moving into and out of Australia."
We will not be participating in their capital raising now, but prior to this thought WBC may be fairly priced.

 

[SirRumpole]

A potential $1 bn in fines is surely going to drive the share price down, at what price will it be good value ?

 

[Ferret]

We will not be participating in their capital raising now, but prior to this thought WBC may be fairly priced.

What is it that Buffet says about buying when all around are fearful? I'm still going to participate.

 

[rederob]

What is it that Buffet says about buying when all around are fearful? I'm still going to participate.

I learned from experience that there is a chance of buying later on at a lesser price, and also learned to never hurry.
Banks might be on the nose, but like insurance companies have a product in demand (aka "money" in the case of banks) and numerous means to recover any losses.
In the case of WBC until that probable loss is known then its share price stands to meander and decline, while any reason/s for it to rise in any meaningful way are presently not apparent.

 

[Ferret]

I learned from experience that there is a chance of buying later on at a lesser price, and also learned to never hurry.
Banks might be on the nose, but like insurance companies have a product in demand (aka "money" in the case of banks) and numerous means to recover any losses.
In the case of WBC until that probable loss is known then its share price stands to meander and decline, while any reason/s for it to rise in any meaningful way are presently not apparent.

All good points.

I've also seen many times where you can buy later at a lower price. Similar situation with dividend reinvestment plans and why I generally no longer participate in these.

Nevertheless, I'm tempted by the 2% discount here.