WBC Under ASIC Lens -ASIC Alleges Westpac Broke Law More than 150K times 

  • May 07, 2019 AEST
  • Team Kalkine
WBC Under ASIC Lens -ASIC Alleges Westpac Broke Law More than 150K times 

Westpac Banking Corporation (ASX: WBC) is the first bank of Australia and is one of the largest banks in New Zealand. The group’s divisions include consumer bank, business banking, institutional bank and Westpac New Zealand and Financial Group Australia.

The big four banks were alleged of breaching responsible lending laws between 2011 and 2015 by the Australian Securities and Investments Commission (ASIC) in 2017, when it resorted using a benchmark instead of the actual expenses declared by the customers in assessing their ability to repay their home loans.

Westpac tried settling the matter with ASIC by agreeing to pay $35 million fine last year; however, the matter has not been resolved only to be back in court this week after the court refused the settlement.

Additionally, Westpac had failed to assess the ability of the customers to meet the higher repayments when interest-only periods expired, as a result, the allegation of breaching responsible lending laws 154,351 times has been entrusted on them. Nevertheless, the case is substantial as it will clarify the necessary steps that banks must take to meet the responsible lending requirements.

The company recently announced its 2019 half year result. The key highlights included the reported net profit of $3,173 million, down 24% as compared to H1 FY18. The cash earnings of the company were $3,296 million in H1 FY19, down 22% from the prior corresponding period. Cash earnings per share remained at 96 cents for the period, down 23% on the prior corresponding period of H1 FY18. The return on equity for the company stood at 10.4%, down 3.5 percentage points on the prior corresponding period H1 FY18.

The Westpac Group Board has determined an unchanged interim dividend of 94 cents per share to be paid on 24th June 2019. The dividend reinvestment plan (DRP) will continue to operate, and a 1.5% discount will apply to the market price. The discount to the DRP market price has been applied to give the group additional capital flexibility, including for regulatory changes to the measurement of capital and risk weighted assets likely to be announced in second half 2019.

The common equity Tier 1 capital ratio for the company stood at 10.64%, which is above the strong benchmark of APRA. The operating expenses for the company increased 1% in the half, as major remediation and restructuring items increased by $162 million.

On the price-performance front, at market close on 7th May 2019, the stock of Westpac Banking Corporation was trading at a price of $27.060, an decrease of 0.184% during the day’s trade with a market capitalisation of $94.5 billion. The stock has yielded a YTD return of 10.74%, with returns of 0.71%, 2.81% and 4.75% over the past six months, three months and one-month period, respectively. Its 52-week high price stands at $30.440 and a 52-week low price at $23.30, with an average trading volume of ~6.22 million. The stock is currently trading at a PE multiple of 13.150x.


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