Westpac To Defend Claims Against Responsible Lending Obligations

Westpac Banking Corporation (ASX: WBC) provides services including like institutional banking, business banking, consumer banking and wealth management services. Westpac’s segments include Westpac Institutional Bank (WIB) and Westpac New Zealand and BT Financial Group (BTFG), and it operates throughout Australia, New Zealand, Asia and in the Pacific region. The bank was incorporated in 2002. The bank is engaged in taking deposits, lending, payments, portfolio management and advice, superannuation and funds management, insurance services and interest rate risk management.

Westpac, today on 21 February, confirmed that it is aware of the class action against it regarding responsible lending laws brought by Maurice Blackburn and litigation funder Harbour Litigation Funding. The bank takes its responsible lending obligations very seriously and will defend the claims against it. Westpac works with customers who experience financial difficulty to provide tailored assistance as required. The claim filed by law firm Maurice Blackburn in the Federal Court alleged Westpac to breach responsible lending laws by providing unaffordable loans, leading to “substantial losses” for many customers.Â

The company in the recent past came up with its business updates on 1Q19. 1Q19 cash earnings of the company stood at $2.04 bn, up by 6.9% on 2H18 quarterly average (0.5% lower than 2H18 average excluding $281 million of remediation provisions). The net profit after tax of the company for 1Q19 stood at $1.95 billion (cash earnings adjustments $0.09 billion, mostly related to fair value losses on economic hedges).

Westpac’s asset quality and capital remained strong. As on 31 December 2018 the common equity Tier 1 capital ratio of the company stood at 10.4%, which was lower than the 10.6% reported for September 2018, on the back of payment of final dividend by Westpac. This reduced the common equity Tier 1 capital ratio by 69 bps. Stressed assets to total committed exposures (TCE) were little changed over the quarter, and no new individual loans over $10 million became impaired in 1Q19. Credit quality metrics remain near cyclical lows. The impaired assets maintained a stable level, with no further individual impaired loans over $10 million in the quarter.

On the price-performance front, the stock of Westpac Banking Corporation last traded at $26.770 with an increase of ~1.325% during the day’s trade and with a market capitalisation of $91.08 billion. The stock has generated a YTD return of 7.92% and posted a negative return of 12.34% over the last six months; however, it has generated returns of 3.85% and 0.84% over the last three months and one-month period respectively. The stock has a 52-week high price of $31.40 and a 52-week low price of $23.30 with an average trading volume of ~6.69 million. It is trading at PE multiple of 11.120x with an EPS of AUD 2.375 and with an annual dividend yield of 7.12%.

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