WBC - Westpac Banking Corporation

[Sharkman]

I sold half the SMSF holding of WBC today. Half can stay in the bottom draw no worries as the SMSF will hopefully still be around in 40 years time, but there are better opportunities elsewhere for the other half.

pretty much sums up my view on the banks as well, although i'm not selling down any of my positions, i'm just not buying any more units, and haven't for the last few years. i'll let them auto-adjust on their own and become a smaller and smaller % of my portfolio if they keep floundering the way they have been for the last few years (or if they unexpectedly rally, then they'll auto-correct the other way).

however i am starting to get tempted by the idea of buying up a bunch of 2-3 month OTM calls as a Hail Mary punt in case it rebounds. usually i stick to covered calls and naked puts these days, but might make an exception here, as i just can't figure out how the implied vols are so low with all the uncertainty swirling around. i must be overlooking something as this seems to be ridiculously cheap gamma considering what's going on?

the Feb 27s for eg. can be had for just a few cents - an IV of about 14, and there isn't that much skew either, with the near ATMs at around 15.5-16. the delta is around 10, so it's a rank long shot, but the strike is less than half the distance to the last peak, so if this whole incident unexpectedly blows over, or even if things just quieten down a bit for a few weeks, those 10 delta calls could fetch a decent payoff for very little cost.

 

[dyna]

Bought 10 grand worth of WBC at $24.40,today.My first of three shots at this thing.From what I can tell,watching the huge volumes going thru the market,these past few weeks,there ain't no mums and dads in it,but shrewd pros,cleverly hiding behind small buy orders. Is Westpac heading for the low $20's? maybe...then again,maybe not.can't help but think I'll miss the bottom,somehow....too damned hard to pick

 

[Ferret]

SPP price is announced as $24.20. A pity today's market tumble came a day after the pricing period...

Anyway, I've taken a chance and have an application in. I feel ok about the banks at least for the medium term.

 

[qldfrog]

Bad news for SP future, just jumped in and bought a small packet at 24.00 today, i thought with a spp at 24:20 what can go wrong in short term
My entering a stock wo a system in place is usually bad news for the SP...

 

[kahuna1]

Still adding ...
Also ... adding ANZ NAB BEN to the mix.

Our market is reflecting a full correction and well, at 10 year inflation adjusted lows, we shall see.

Slowly slowly ... panic is always a lift shaft. Not so long ago the total opposite despite the fleas being out in the open and the case of WBC at $30 peak to .... 80% of that today without some GFC is somewhat amazing.


Enjoy

 

[Knobby22]

Still adding ...
Also ... adding ANZ NAB BEN to the mix.

Our market is reflecting a full correction and well, at 10 year inflation adjusted lows, we shall see.

Slowly slowly ... panic is always a lift shaft. Not so long ago the total opposite despite the fleas being out in the open and the case of WBC at $30 peak to .... 80% of that today without some GFC is somewhat amazing.


Enjoy

Yes, and 10 years ago WBC was the same price!
Compare that to CSL.

I think you may be right though, this is only a short correction (famous last words).

 

[kahuna1]

10 years ago WBC was the same price!
Compare that to CSL.

I did prefer MFG 10 years ago to CSL ... one went up 50 fold .. whilst not an avid poster on this site, I did have numerous discussions WITH MYSELF mainly about CSL and MFG where people were more interested in PDN and the Uranium bubble than the likes of CSL or MFG.

I note, with great amusement this thread, people not commenting say at $30- not so long ago and now dumping at $24- .... Value is always a reflection of price and whilst not amused at say $28 and above for WBC and exiting and reducing ... $25 and below and todays addition at $23.93 most amusing despite being under water on the initial addition if one does not count the $5- plus previous capital gain over the last 12 months.

Yep Banks will not do a CSL or close to it, however ... in and out ... in and out ... that added to a grossed up yield of 8% .... one triples your money over 10 years and then some.

Only time will tell at this stage.
I note ... the Trump circus yet again hits and now Bloomberg the Republican who is running as a democrat and his media mouthpiece is claiming, yet again ... some breakthrough on China and in a blink USA markets rally 1% .

Likely the rally goes on, when the end outcome of stage one ... is nothing. Nothing good for either China or in fact the USA.

Back to sleep for now. Have no brilliant ideas in this market with even second rate stocks say in the consumer side which their numbers are sucking like COL and WES are up 30-50% . The attraction of banks is that whilst their numbers are not great, they are reflecting reality and not priced at absurd levels.

In the end, 2020 likely to be a doosey with 2019 rewriting many finance books and macro economic principals and laws that have and still do dictate things. Just in 2019, we ignore the USA deficit and corporate paying 50% of the tax they did in 2006 ... and ignore that USA the majority of the population now pays well over 3 times the price for healthcare which is not something which is optional. Either you get medical help or more often than not you die.

Whilst at this stage unlikely a change in 2020 from Trump, heaven help them if they reversed the idiotic tax cuts to the rich and actually made healthcare in the USA cost similar to Canada over a few years. The market will have a cow, let alone wealth tax for cretins who evade tax and ones like Bezos who amazingly had a billion dollar company that rarely had made a profit, never paid a dividend and PAYS NO TAX .... PAYS NO TAX.

Quite a contrast to say an Australian bank which pays through the nose tax ... highly regulated and at this stage being micro managed and supervised to absurd standards. These things go in long term cycles and USA will eventually change either in 2020 or 2024 and demand tax actually be paid, conversely here, this bank bashing and blaming mantra will fade and things will go back to the last 207 years for WBC.

 

[Toyota Lexcen]

the banks probably going to drop around 5% tomorrow with NZ RBA to announce capital requirements.

5yr return very poor, cant see how WBC can get over $30 and sustain that in the next 10-15yrs

great article by christopher joye in AFR vabout the price banks are paying to be crime fighters

with a lot of terrorism being conducted by lone wolf type individuals its really just over regulation

 

[kahuna1]

the banks probably going to drop around 5% tomorrow with NZ RBA to announce capital requirements

Possibly .... hoping for it since NZ requirements for a market less than 10% of total book size will inspire someone to sell another 5% .... is ... unlikely. Most have been raising capital and reducing payout ratios in anticipation of this event either way.

 

[Toyota Lexcen]

they will definitely go to shareholders for the capital needed in NZ, will be 10% discount at least I would say

 

[kahuna1]

Oh gosh ...

long into our banking fiasco ... banks smashed prior to it... result ... 8% rally

long into election bank selloff ... result 15% rally

now we are doing it again ... combination selloff via .. idiotic supervision .. more capital and a threat of NZ going nuts to protect against an event you cant protect against ...

result ?

Well as to any cap raising ... banks have been moving that way for 18 months.
The highs of recent years .... well over $30- ...
IF NZ raises the bar .. the banks will of course pass on the COST .... increase lending costs .... lower deposit costs.

May even see for some ... NZ float and total divest ...

who knows, suspect its not going to be as bad as the people with no eyebrows !!

 

[kahuna1]

Win win win …


RBNZ capital requirements changes 5th Dec 2019.

Whilst on the face of it going to 16% tier one capital is onerous.

Banks in Australia who own the NZ ones have been aware of this for 2 years.

2 years.

They have been shoring up their capital in expectation of it.
ANZ and WBC the main ones hit both now have come out with a requirement of around NZD 7 billion needed tier one.

It sounds bad, it is in fact far better than expected.

Massively so.

Instead of allowing 5 years, its now 40% more and 7 years.
Secondly weighting for capital requirements have been relaxed.
What is allowed for being called tier one capital RELAXED and preference perpetual share debt that is convertible is now allowed.

Massive all of these.

It gets better.

RBNZ estimates it will make loans 32 basis points more expensive as it is allowing banks to raise their margins and in fact it will generate massive increases in profits in NZ which, will of course be retained and in fact pay for itself.

I suspect about HALF if not more of additional capital will be raised and retained with zero impact to the payout to shareholders. It will of course see say 400 million NZD rising to 750 million each year more profits after tax, but these will be retained.

Bottom line ? Well shareholders get a much more secure bank overall.

Big losers ? Whilst inconvenient and a cost already having this impost of 16% capital required, end result is passed onto the consumer and the investor whilst not profiting from the misery of the poor consumer, gets an institution with massive capital buffers.

Whilst so many have worried about this for so long, the end result is actually far far far less than feared. Having 7 years, an open and published acceptance by RBNZ that the net margin banks earn will rise 0.32% …. and the relaxing of how risk is counted coupled with some relaxation of what is counted by RBNZ as actual capital means basically …. NOTHING.

Win win win … except for poor NZ consumers.

I do note how absurd it is to raise capital requirements to worlds best, highest cost and when the USA and EU will not even confirm to the much lower levels and ones 4% lower by 2024 makes it all a nonsense. In a global market, when an issue such as the GFC occurs, global systemic risk is key.

Whilst nice, and pretty, its absurd if not idiotic to demand this of banks when more than likely the risk will be global. Having 16% capital cushion in say 2027 when its likely some will be delayed and be holding 11% or less makes your banks not really that much safer in a global contagion, which is likely what will occur next crisis.

Reading the 300 pages of PDF's released I am somewhat agog at how much has been given on one hand …. and taken on the other via higher consumer and borrowing costs.

As to predictions of end of the world or payout ratios using idiotic past data when say WBC used to pay out $1.88 and its now $1.60 speaks for itself.

Suggestions of some new force about to take over banking, well, it will be regulated just the same and have no capital, no infrastructure and be required to report and provide similar if not identical safeguards as existing banks. In short the hurdle just got higher and entry to the market harder and more expensive as a result.

Similar things occurring in Australia for identical reason and recent rate cuts, not passed on …. same reasons and same result. Lions share of the fall in dividends already occurred and implemented with most cutting by 10% the size of the dividend paid.

Good luck


ANZ up WBC up and the prediction of some 6% fall somewhat amusing right now.

 

[sptrawler]

WBC new chairman named, ex ANZ's John McFarlane. They are dusting off the old timers, to bring back a bit of class, there may be hope for us ASF old timers yet.

https://www.abc.net.au/news/2020-01...rman-john-mcfarlane/11893396?section=business

 

[tinhat]

I sold the SMSF out of all bank shares recently. I think it was Dec 19. My mum still holds some bank shares and I will be advising her to sell out too because she needs to do some serious renovations. Me the big bank bull, buy bank shares, better than bank deposit. Well not any more, It's boom time on the ASX, don't know how long it will last, but no point being stuck on the starters line when the other cars are half way around the track.

 

[sptrawler]

I sold the SMSF out of all bank shares recently. I think it was Dec 19. My mum still holds some bank shares and I will be advising her to sell out too because she needs to do some serious renovations. Me the big bank bull, buy bank shares, better than bank deposit. Well not any more, It's boom time on the ASX, don't know how long it will last, but no point being stuck on the starters line when the other cars are half way around the track.

Im tending to agree with your sentiments, Im heavy in the banks and best case scenario IMO is they will tread water. There may be a blip if they decide to mop up the BNPL players, but as far as dividends go I dont see sunshine and lollypops.
So I will probably start and re alocate to more growth stocks, maybe pick up a few more WES?

 

[sptrawler]

I will add to the last post, I will wait for the outcome of the AUSTRAC incident before making any move.

 

[dyna]

Bought another ten grand worth of WBC at $23.90,today.I'll have one more go at this,to see if I can pick the bottom.(Thanks for the virus.)

 

[kahuna1]

I have been active of late in Banks ....

added or should I say purchased at absurd prices today.

Was NOT amused at WBC or its accounts.
Clearly and very clearly it stunk, despite that the stock went UP and UP and UP from $23.66 low to an insane $25.96 high. I wish I had all the buys I did at the low, but when the accounts were examined along with commentary it was a total no brainier to reduce and reduce very HARD. Reason being the capital adequacy, comments about more storms on the Horizon and well ... when the market up to a week ago gives one a gift exit when its clear its time to give the idiots back the shares they sold.

I missed the range of 8% by a long way, but ... also got the 80 cent fully franked dividend to make up for the slow way I entered ... and so too the slow exit.

Cannot complain ... the total range was 8% .... and despite being too soon buying ... 3% off the lows and snagging close to the absolute low ... only got half that ... so ... overall well over 10% yield plus some serious franking credits.

Entered today ... SLOWLY ... this is the bank with the biggest fleas, Litigation wise ,,, capital wise ... and of course managed to pay near the bloody high for the day when the low ... was 35 cents LOWER.

Despite issues ... and knowing them, being paid 6% plus and that's being ultra conservative ... with franking credits again for me is fine. I might add 12 month low of close to it as well.

We shall see how far they send it this time but not about to miss the mayhem.

Added a few of the other banks as well after giving back in the same way as they had even insaner rises. ANZ for example .... went up from $24- to an idiotic .... $27.29 which, well .... even the blind could see at 13% rise was idiotic,

NAB .... similar if not identical rise to ANZ .... and NAB seems to have less issues than any of the banks.

BEN ... knowing full well there was a cap raising coming, the results were good .... but CAP raise and lowered dividend as expected again not great. ... but boy did they slam that a few months ago ... irresistible ... knowing the risks and a mid range 10% or so rally. Its now hit the ground with a thud ... despite being with dividend of 31 cents fully franked and I suppose .... risk the dividend yearly is 58 cents or so .... 55 longer term .... at $9.20 well ... with 31 cent Dividend next week .... seriously ?

Yet another 6% yeild ... at worst likely a bit higher ....

BOQ I put in the trash .... forever.

One thing is clear, and that's we remain at low rates for a long time. When offered an effective yeild of 6% plus franking credits so equiv of over 8% .... gee ... golly golly gee.

But for now end of world.
If Bernie gets in, USA will have a cow .... corporate made to pay tax ? Healthcare at absurd prices and awful coverage ... some of them will overnight thankfully implode.

Time will tell on that one. First he needs to be selected over the corrupt Democratic party elites and likes of Billionaire imbeciles like Bloomberg. Spending 500 million on his preselection and likely USD 700 million by Super Tuesday ... which is 4 days away !!

The man is a zombie that makes even Zuckerburg look human which he is not ...

Should be a fun 2020 ... and if Bernie wins .... which I suspect he is a shoe in, with some serious caveats on the bloody party he is running for ... who is so corrupt ... then Trump ... he faces Trump ... the Yam headed imbecile.

Enjoy

 

[Knobby22]

Banks are the riskiest asset in a severe Recession, they are heavily geared, reliant on people being able to pay their loans.

I reckon that due to the virus disruption of the world economy unemployment will rise and businesses will go broke. Banks may make a loss over the next 6 months.

I think it's a brave choice to own them.

 

[Cam019]

WBC has already breached the lows of the GFC in one single month. First downside target from here is $8 - $9.50. Purely an observation.