Could the Westpac Banking Corp (ASX: WBC) share price be a buy after the major ASX bank announced a wealth reset?
Westpac Banking Corporation, more commonly known as Westpac, is one of Australia’s ‘Big Four’ banks and a financial-services provider headquartered in Sydney. It is one of Australia’s largest lenders to homeowners, investors, individuals (via credit cards and personal loans) and business. Its name is a portmanteau of “Western” and “Pacific”.
Is the Westpac share price a buy?
The purpose of today’s announcement was the way it deals with customer wealth and insurance needs in light of the Royal Commission report.
Westpac said that it’s undertaking a number of changes to improve things. The first thing it’s doing is realigning its major BT Financial Group businesses into the Consumer and Business divisions. It is also exiting the provision of personal financial advice by Westpac Group salaried financial advisers and authorised representatives.
The bank also said that it is moving to a referral model for financial advice by utilising a panel of advisers or adviser firms.
Westpac is entering into a sale agreement with Viridian Advisory as part of the exit. Many BT Financial Advice ongoing customers will be given the chance to transfer to Viridian, and Westpac financial advice staff are also expected to transition to Viridian.
During this change, Westpac will be simplifying the structure of the bank and change executive responsibilities whilst continuing to invest in the BT brand, although BTFG will no longer be a separate division.
Westpac summarised this move by saying that it will unlock value by exiting a high-cost, loss-making business. The costs of exiting and restructuring are expected to be offset by future cost savings. Tho one-off costs will be around $250 million to $300 million. However, the $53 million loss the Advice business made in FY18 (excluding remediation) and $20 million of annual productivity savings from operating one less business division will be useful over time.
Are Westpac shares a buy?
The Westpac share price has risen nearly 1% in early response to this news, so clearly the market likes it. I agree, it makes sense to exit a business that simply isn’t generating the profit for all of the hassle and costs it creates (and has created).
With a fully franked dividend of just over 7%, Westpac remains an interesting idea for a high level of dividend income. But, with Australian house prices continuing to fall heavily, I would rather stick to one of the proven long term dividend shares in the free report below.
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