The Needle On Westpac Banking Corporation

The Needle On Westpac Banking Corporation

Westpac Banking Corporation (ASX: WBC), nation’s oldest bank, is recognised as one of the four significant banking organisations in Australia.  It is domiciled in Sydney, Australia and was founded in 1817.

December 2018 Pillar 3 Report:

In December 2018 Pillar 3 Report, WBC’s common equity Tier 1 capital ratio was noted at 10.4% at 31 December 2018.  WBC adopted AASB 9 on 1 October 2018 which had an inconsequential influence on WBC’s capital ratios, and it influenced the elements of capital ratios with CET1 capital being down at $0.3 billion and the risk-weighted assets were $3.9 billion lesser.

The entire Risk Weighted Assets (RWA) lessened by $5.8 billion during the quarter which included adoption of AASB 9 decreasing RWA by $3.9 billion and regulatory model upgrades for the corporates lessened RWA by $1.0 billion which were partly offset by the growth of portfolio raising RWA by $2.0 billion, mainly in corporate exposures and translated foreign currency influencing the augmentation of RWA by $1.9 billion from the appreciation of NZ$.

On 28 December 2018, WBC provided $1.42 bn of further Tier 1 capital, out of which circa $0.72 billion consisted of reinvestment by the holders of Westpac Capital Notes. During the quarter, exposure at default augmented to $4.7 billion, up by 0.5% because of a rise in corporate exposures of $6.1 billion and exposures in residential mortgage at2.8 billion. WBC’s leverage ratio was at 5.7%.

1Q19 funding and liquidity highlights

The liquidity coverage ratio at 31 December 2018 was at 128% and the average of liquidity coverage ratio on the same day was at 133%.  NSFR was 112% (114% at 30 September 2018). $9.1bn in term funding was issued in 1Q19. A further $6.7bn was issued in January 2019. The majority of 1Q19 new term issuance came in AUD and Euro. Benchmark transactions included A$2.75bn 5- year senior transaction, A$1.5bn 3- year senior transaction and A$1.4bn Additional Tier 1 transaction, as well as €1.0bn 2- year senior transaction and €1.0bn 5- year covered bond.

Group Structure

Westpac New Zealand Limited (WNZL), a 100 % owned subsidiary entity, is a registered bank assimilated in New Zealand. WNZL utilises the developed IRB approach towards credit risk and AMA for operational risk. Westpac Bank-PNG-Limited and Westpac Europe Limited are the other 2 subsidiaries of WBC.

Key trends within cash earnings over the December Quarter:

  • Net interest margins excluding Treasury and Markets were higher following some repricing late in the 2018 financial year.
  • The contribution from Treasury and Markets was lower as trading conditions were weaker.

Business Performance

Australian consumer unsecured lending delinquencies increased over 1Q19 in part driven by operational issues in Collections. Australian mortgage portfolio continued to perform well. The increase in Australian mortgage 90+ day delinquencies over 1Q19 was driven in part by operational issues in Collections, as well as a rise in arrears in WA and NSW Properties in possession continue to be mostly in WA and Qld, where a targeted collections approach remains in place.

The stock of the company at the end of the trading session stood at A$26.770 (as at 20 February 2019), up by 1.33% or 0.350 points. WBC has a market capitalization of circa A$ 91.08 billion and 3.45 billion shares outstanding. Its 52-week high was noted at A$31.400, and low was noted at A$23.300. The stock of the company has generated a positive YTD return of 7.92%.


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