- Westpac bank shares down as company disappoints investors over full-year results performance.
- Kiwibank blamed the situation on coronavirus pandemic and the recent AU$1.3 billion civil penalties.
- Westpac made significant changes in the business strategy to improve performance.
The Westpac Banking Corp (ASX: WBC, NZX: WBC) share price has been on a precipitous slide since first quarter CY2020. For the Kiwibank, it's been a roller coaster ride this year, as the ultra-low interest rates are pressuring the banks on their net interest margins (NIMs).
Westpac recently released its full-year results for the 12 months ending 30 September, the repercussions of which also reflected on its share prices. Net profit for the group reported at AU$ 2,290 million, lowered by 66 per cent and cash earnings per share (EPS) fell by 63 per cent to AU$0.725.
The earnings have been impacted because of various factors erupting from COVID-19 and AUSTRAC fine.
The COVID-19 impact led to increased impairment charges, higher cost, and lower-income. Most importantly, the results reflect a sharp decline in economic activity in the country. The bank is fined AU$1.3 billion in civil penalties for breaches to the AML/CTF act.
On a positive note, Westpac has been successful in maintaining the strength of its balance sheet. Its Common Equity Tier 1 capital ratio remains at 11.13 per cent.
However, the disappointment continues with the bank declining to pay interim dividend, citing the coronavirus pandemic impact as a reason. The final dividend announcement of AU$0.31 is also likely to discourage income-focused investors. Since 1986, this is the first time that Westpac has denied to pay a biannual dividend.
Hopes for the better tomorrow:
On a disheartening note, Westpac Group CEO, Peter King commented that the year 2020 had been a challenging year for the company and its financial results had been disappointing. King said that the bank had to navigate through higher expenses because of the increase in resourcing to manage the unprecedented demand due to COVID-19 crisis.
Will the housing boom impact negatively?
Westpac NZ CEO David McLean interacted with the media in light of the latest housing boom in the country. McLean said that the hike is not a bad thing for a short run, but it is not healthy, especially in the long term. The consumer's confidence is high in the wake of the post-Covid situation which is acting as a 'sugar rush', but to continue such record-high housing prices for a long run, (which we can see currently) will harm the country.
He emphasised that the situation will worsen in creating inequality. While interacting with the media, he said that the Reserve Bank was aware of the problem and was fighting to tackle it. Over the years, Westpac has made a steady process and has become a more straightforward, and robust bank.
The Kiwibank recently made many significant changes addressing its shortcomings and reshaping the key areas to focus on becoming a customer-focused business.
Westpac stock on focus: