Westpac has announced the formation of a specialist business division, which includes wealth, superannuation, investments & automotive, general & life insurance. The bank is taking a strategic review to assess the most appropriate ownership structure.
The specialist business generates 2% of revenue and uses 8% of group capital. UBS assesses the disposal of these assets could help strengthen CET1, especially as Westpac indicated RWA inflation is likely to absorb 105-180 basis points of CET1 of the next two years.
However, the broker acknowledges disposing of these sorts of businesses is not easy in the current environment.
Increased credit provisioning and strategic options around capital remain the key positives, UBS adds. Neutral rating retained. Target is $18.50.
Sector: Banks.
Target price is $18.50.Current Price is $16.20. Difference: $2.30 – (brackets indicate current price is over target). If WBC meets the UBS target it will return approximately 12% (excluding dividends, fees and charges – negative figures indicate an expected loss).
