The Westpac (ASX: WBC) share price has fallen 5% in early trade after returning to the ASX.
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 businesses.
Westpac’s Disappointing Share Price Fall
Today is the first time that investors have had the chance to react to the FY19 result that Westpac reported yesterday.
As a reminder, its statutory net profit dropped by 16% to $6.78 billion. Its cash net profit fell quite hard as well, it dropped 15% to $6.85 billion.
Westpac said that customer refunds, payments, associated costs and litigation amounted to $958 million after tax during the year. It also spent $172 million after tax on the restructuring of its Wealth business.
The bank’s net interest margin (NIM) fell by 0.10% (10 basis points) to 2.12%. This is the profit measure that shows the interest rate difference between what Westpac is able to lend out money compared to what it costs to secure that financing (eg bank deposits). A falling NIM means less profit.
All of the above resulted in Westpac’s Board cutt the final dividend by 15% to 80 cents per share so that it had a more sustainable payout ratio.
Westpac announced this morning that it had successfully raised $2 billion to improve its balance sheet to make sure it meets its CET1 APRA requirements to be unquestionably strong.
However, that capital raising price of $25.32 per new share was a 6.5% discount to the adjusted (to not include the dividend) last closing share price of $27.08. But now the share price is $26.59, so the discount is quite a bit smaller than 6.5%.
Economists believe an interest rate cut is very unlikely today (Melbourne Cup day), however a cut for February is seen as more likely after ABS retail sales figures showed growth of only 0.2%.
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