Westpac Share Price Drops

Westpac Banking Corp [ASX:WBC] has continued their share drop trend, dipping 1.22% this morning.

The bank is down 35.9% for returns on investments in healthcare and over 20% down in IT, telecommunications and the consumer sector.

Return on equity stands at 13.8% which is below the ASX standard.

With a market cap of $104.494 billion, Westpac has provided banking and financial services since 1817.

Westpac operates across Australia, New Zealand and Asia.

The bank stands at a huge enterprise value of $277.88 billion

What’s the latest with the large Aussie bank?

Westpac’s Chief Financial Officer Peter King thinks Australian banks are not highly profitable.

He believes that even though banks are earning huge dollar amounts, this does not mean they are turning over a high profit.

King states that Westpac’s return on equity has fallen over 40% in the past decade.

This fall is due to increased compliance costs and high capital requirements.

In 2008 Westpac’s return on equity stood at 22.3%. By 2017 it had dropped to 13.8% as indicated by the full-year results during the month of November last year.

Returns on equity is the major downfall of the big four banks, as they are lower than the banks of Canada.

The four large banks have recently suffered allegations of misleading financial advice as well as insurance fraud and accusations of breaching laundering rules.

Westpac’s legal troubles continue

A former client is taking legal action against Westpac.

Greg Holloway is blaming the bank for advising him to invest in financial products that turned out to be sour.

The case dates all the way back to 2009 when Mr Holloway acquired a million dollars’ worth of Macquarie derivatives.

The Macquarie assets allowed Mr Holloway to earn up to a $5 million profit if the ASX 200 index closed above the price, which was advised by Westpac.

However, Mr Holloway’s investment proved to be worthless due to the fact that the ASX 200 closed below the strike price.

Westpac was paid $55,000 in commission for their financial advice on the matter.

As a result, Mr Holloway is now claiming damages from Westpac, which scale between the price he paid for the derivative and the value of the overall product.

Westpac denies the allegations made by Mr Holloway, claiming he told financial advisors he was interested in leveraged investments.


Ryan Clarkson-Ledward,
For Money Morning

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