WBC - Westpac Banking Corporation

[peter2]

I won't be considering the buyback at all. It's doubtful that there'll be any significant tax advantages for me. If the offer had a set price, with a capital return portion I'd be better able to gauge any benefits. Not possible, with an unknown price.

This position for me is a 6 -12 mth trade. I'm extremely confident that this position will work out out positively for me, even if it takes two years. Price has started to move off the low.

 

[sptrawler]

I won't be considering the buyback at all. It's doubtful that there'll be any significant tax advantages for me. If the offer had a set price, with a capital return portion I'd be better able to gauge any benefits. Not possible, with an unknown price.

This position for me is a 6 -12 mth trade. I'm extremely confident that this position will work out out positively for me, even if it takes two years. Price has started to move off the low.

Considering they were trading at $24 ten years ago, it is difficult to see anyone other than extremely long term holders and institutions looking for the franking credits, participating.

 

[peter2]

Quickly skimmed the WBC Off-Market Buy-Back booklet to understand the benefits of selling in this buy-back.

Capital return of $11.34 (ATO draft ruling)
Final buy-back price - $11.34 = Dividend with full franking credits.

The booklet shows several examples across the tax scales. There maybe a benefit for some people depending on their tax situation. It will require some calculations on your part to determine if there is any benefit for your situation.

In my situation, SFund paying pension, so no CGT, it's only the franking credits on the dividend portion that's of interest. The franking credits would be nice but I'd have to realise a loss on the shares as they were recently purchased and will be higher than the buy-back price.

 

[Sharkman]

i dunno, it just seems pretty lacklustre to me at first glance on today closing price. even with the minimum 8% discount the dividend component (9.55) would be less than half the buyback price.

compared to the recent CBA buyback where at the maximum 14% discount, the capital component was just 21.66 (29.22 for tax purposes), the dividend component was a whopping 66.96, bringing in a truckload of franking credits!

i guess it might be ok if the discount comes in towards the lower end, the investor operates in the lower tax brackets and/or has some undiscounted CGT liabilities to offset, but it still falls a long way short of the CBA offer in my view. at a 14% discount that's ~3.51 of franking credits vs ~3.18 lost to the discount, the CBA deal had ~28.70 of franking credits vs ~14.40 lost to the discount.

 

[KevinBB]

Hello @sptrawler

This type of buy back is good for some, not for others. You're right in that a lot will depend on personal tax implications, no matter what type of entity they are.

I suspect that the main reason that companies do this type of buy back is that they have surplus franking credits to get rid of, and want to dispose of them in the most effective manner for the company. Buying back shares at a huge discount can be very good for the company, and also those existing shareholders who do not take part in the buy back.

For me, it is all about taxation, nothing else. So price doesn't come in to the equation at all. If I am in the position to be able to take advantage of the buy back, I'm in. Again, for me personally, the benefit is that I'm swapping a smallish deductible capital loss, as well as a largish non deductible capital loss, for an even bigger tax refund. In addition, again, for me, the smallish capital loss can be offset against existing capital gains, so there is an additional benefit.

Again, for me personally, the buy back discount doesn't come into the decision making process. If history is any guide, the discount will most likely be the maximum. I don't know of any buy back where this has not been the case. None that I've participated in, anyway. I just accept the price given, knowing that I'll be in front when the tax refund comes.

Of course, I won't know the exact benefit until after the final buy back price is announced. For the recent WOW buy back, the overall benefit to me was just over $1k. I expect the WBC benefit to be similar.

Bring on the next one ... hopefully BHP or RIO when they next report.

KH
(for those reading this, don't take my word for it, go and see your own tax advisor)

 

[peter2]

The massive CBA selloff after news of their reduced margins hasn't helped WBC rally off it's low. Looks likely to take a few more months before investors are willing to buy banks again in a big way.

 

[sptrawler]

The massive CBA selloff after news of their reduced margins hasn't helped WBC rally off it's low. Looks likely to take a few more months before investors are willing to buy banks again in a big way.

It will be interesting to see how it affects the buy back, I can't see many accepting a 8% discount, to these prices.

 

[sptrawler]

WBC closed at $21.80, the buy back is looking very sad IMO.

 

[Sharkman]

WBC closed at $21.80, the buy back is looking very sad IMO.

yes, i thought the offer looked lame as soon as i saw such a high fraction going to the capital component, and it's only gotten worse since then. so it's an immediate throw into the wastepaper basket for me (unfortunately i do have a few units in my buy & hold portfolio... it comprised a decent chunk of my overall capital back when i bought several years ago in the mid 20s, but it's just a minor holding now, having gone nowhere in those several years - the dividends were nice for a while but even those have deserted it now - whilst everything else esp. CSL, S&P 500 ETF have well and truly left it in the dust).

 

[Craton]

ASIC has commenced six civil penalty proceedings against Westpac in the Federal Court.

Westpac has admitted the allegations in each of the proceedings and will remediate approximately $80 million to customers.

ASIC and Westpac will submit to the Court that combined penalties of more than $100 million are appropriate.

Me thinks it's not just WBC, more fall out from the Royal Commission et all to come IMHO.

 

[Dona Ferentes]

AFI writing about the banks

Presently, we rate Commonwealth Bank as the best quality bank, so we have our biggest holding there, with smaller holdings in Westpac, NAB and ANZ. Westpac share price has under performed more recently and consequently it looks to us to be the best relative value at this point, noting it needs to continue to improve its operations and risk and compliance measures, and reduce costs. However, we believe Westpac still has a good franchise and sound competitive positioning in the sector.

 

[Ann]

This is really not a pretty picture. It is now a four-time loser but it kept trying and trying to bash through that long term trendline resistance recently. It looks totally exhausted now . Look what happened on its last failed attempt to get through the trendline back in 2019. Those long term trendlines can be buggers (speaking from experience). I think there may be better value other than bank stocks at the moment, may be wrong of course!

 

[Ann]

Now that I have sufficiently depressed any holders of WBC let me continue with a long term swing trade/measured move calculation. By my reckoning, it would end up at minus $10. Not going to happen, but what may happen is a stock consolidation. As these stocks tend to be held as a dividend income stream, all of a sudden you will be paid a divie on 250 shares instead of 1000, if it is a four for one consolidation. May not be of course, may only be a 1 for 2 which gives you 500 shares from a thousand.
As I always say, I could be very wrong of course.

 

[sptrawler]

You make it sound like a junior explorer Ann, Im not sure the big institutions would be happy with a consolidation, but as always time will tell.

 

[divs4ever]

well WBC has resorted to 'virtue-signalling ' it is starting to act like a 'spin machine ' ( which is why i very little exposure to it now )

 

[Ann]

You make it sound like a junior explorer Ann, Im not sure the big institutions would be happy with a consolidation, but as always time will tell.

Well, back in April 2020 the biggest oil fund USO in the USA nearly got delisted when they were on the wrong side of a trade as oil went into negative $ and had to do a one-for-eight consolidation to keep themselves listed. They had a cute way to describe it "reverse share split", got to just love those spin doctors!

"April 22, 2020

USCF announced today that it will execute a one-for-eight reverse share split that will be effective for shareholders of the United States Oil Fund, LP (NYSE Arca: USO) after the close of the markets on April 28, 2020."

 

[Sharkman]

looks like they have varied the buyback terms today, offer now lasts until 11 feb 2022 and the discount range has been changed to 0%-10% (from 8%-14%). it had to be done, they must've been well aware of how unappealing their buyback offer looked compared to the likes of CBA.

with the changed terms i might just throw all of my units in at 0% in case everyone else is similarly averse to giving away a big discount with the stock at these levels, try to nab a bunch of franking credits, and look to buy back the accepted units afterwards, maybe using some sort of risk reversal. don't think the stock's long term prospects are particularly stellar, but not so keen to give them up at these levels when they've just been beaten down so heavily.

 

[KevinBB]

@Sharkman Thanks for highlighting this. I missed it. Don't know why it wasn't flagged as a sensitive announcement.
KH

 

[sptrawler]

looks like they have varied the buyback terms today, offer now lasts until 11 feb 2022 and the discount range has been changed to 0%-10% (from 8%-14%). it had to be done, they must've been well aware of how unappealing their buyback offer looked compared to the likes of CBA.

with the changed terms i might just throw all of my units in at 0% in case everyone else is similarly averse to giving away a big discount with the stock at these levels, try to nab a bunch of franking credits, and look to buy back the accepted units afterwards, maybe using some sort of risk reversal. don't think the stock's long term prospects are particularly stellar, but not so keen to give them up at these levels when they've just been beaten down so heavily.

Probably had 0% interest in the buy back, what a weird management group.
I like your thinking, the only thing is at 0% I would personally still be putting in a floor price, this is all looking very messy.
$21 + the franking credits still just takes it up to about $26, from my mental arithmatics.

 

[Ann]

I wonder how many people are being sucked in to buy if they follow the RSI oversold signal?