Westpac has signalled it may follow rivals in launching a share buyback, saying its board will consider returning excess capital later this year.
The news will surprise some investors as it is struggling to nail down a more than $400 million alleged fraud involving a group of companies in Sydney.
Westpac is also having to wear a $1 billion penalty capital overlay imposed by APRA as punishment for the bank’s 23 million breaches of anti-money laundering and anti-terrorism laws.
In a capital update to the end of June, Westpac on Tuesday became the latest lender to report that it was holding excess capital, with common equity tier 1 capital of 12% , compared with the 10.5 per cent required by regulators.
Much of the surplus has been generated by the sale of various assets such as its insurance business and funds management investments.
The ratio had fallen from 12.3% in March due to the bank’s payment of its first-half dividend, and growth in its risk-weighted assets (loans, adjusted for riskiness).
Commonwealth Bank ($6 billion), National Australia Bank ($2.5 billion), ANZ Bank ($1.5 billion) and Suncorp ($250 million) have all announced buybacks in recent weeks, Westpac looks set to wait until the release of its September 30 year results in November.
“Given excess capital and franking credits, the board will consider a return of capital, with an update expected at our FY21 results,” the bank said in its latest quarterly update on capital and credit quality.
The update, which did not include figures on profits, showed the bank was seeing lower bad debts, with its stressed assets as a share of total exposures falling 9 basis points to 1.51 per cent.
Westpac said 3,700 mortgage customers and 725 business borrowers had put their repayments on hold during the current lockdowns in Sydney, Melbourne and parts of southern Queensland. It described this as a “relatively small” number of deferrals.
Westpac though warned lower profit margins in its second half and that will not be greeted well by analysts.Unlike the CBA, ANZ and NAB, Westpac no longer updates the market on its trading, just its capital, debts and asset positions.
