Is major ASX bank Westpac (ASX: WBC) about to do a capital raising?
What is Westpac?
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.
Is Westpac about to do a capital raising?
Well, NAB has just announced a capital raising
of around $3.5 billion. That was despite NAB being well capitalised coming into this crisis.
You could say the same about Westpac. Its CET1 ratio was probably around 10.5% at 31 March 2020 – it was 10.8% at 31 December 2019, but then it announced a 0.3% hit due to a number of provisions, largely the upcoming AUSTRAC penalty.
No-one knows how much economic pain COVID-19 is going to cause the banks. So the leadership might decide it’s better to be safe than sorry.
Now that NAB has done it, the other banks may think it’s okay to do as well. But NAB also announced an interim dividend (cut down to 30 cents per share). I think that’s likely to mean that the other banks like Westpac will declare a (heavily reduced) dividend as well.
Is the Westpac share price a buy?
Well NAB’s capital raising was at a sizeable discount to the last closing price, so if Westpac is to do a capital raising it would probably be quite dilutive. I wouldn’t want to buy shares, I’d much rather go for these top technology shares:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
