Westpac’s Share Price Slips After ASIC’s $35 Million Fine

Westpac’s share price was battered once again this week, after it agreed to a settlement with ASIC to pay $35 million for breaching the National Consumer Credit Protection Act.

While the matter is still subject to court approval, effects could still be felt in its share price. On Tuesday, 4 September 2018, Westpac’s share price fell by 9.35% from the beginning of the year.

At time of writing, shares of Westpac Banking Corporation [ASX:WBC] were trading at $27.80 apiece.

The investigation, taking place in March last year, was wrapped up quickly after Westpac accepted it had approved about 10,500 loans between December 2011 and March 2015 that never should have been granted through its automated decision-making process.

Westpac’s share price ready for further commission fallout

Now Westpac is scrambling to steel itself against the latest fallout from the Banking Royal Commission, it joins competitors by considering the sale of its financial planning arm.

This comes after the dismantling of ‘vertical integration’, which allows banks to manufacture and sell financial products — at the possible recommendation of the commission.

In reality it seems like an attempt at damage control, in the likelihood of a worst case scenario. History tells us this could be on the cards after all banks have experienced a consistent decline in their share price since the start of ASIC’s investigation.

However, the review happening at Westpac is thought to only be covering in-house financial planners, not advice given in areas such as life insurance, wrap and superannuation products and approximately $12 billion in funds under administration on the Panorama investment platform, as reported by the Australian Financial Review.

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Head of Westpac’s consumer banking and Chief Executive George Frazi was quick to comment on the scandal:

Westpac takes its responsible lending obligations very seriously and this action does not relate to our current lending practices. We upgraded our credit assessment in 2015 and continue to thoroughly assess home loan applications.

Westpac Shareholders must wait until end of year results for answers

The full extent of the impact that this will have on Westpac won’t be known until the company realises its 2018 Full Year results.

Earlier this year Westpac’s Chief Executive Brain Hartzer put this statement to the public:

If banks get totally out of financial planning and a customer walks in and says “I just inherited $100,000 what should I do with it?” If the bank doesn’t have a financial planning capability they’re just going to say “just stick it in a term deposit”.’

And against his major banks colleagues, Hartzer seems steadfast in his commitment to wealth management, in the form of its BT financial Group.

But going off past influences to Westpac’s share price, it’s reasonable to assume that the effects of this agreement may only be the beginning and could add to its declining share value.

Kind regards,

Ryan Clarkson-Ledward,
For Money Morning

PS: Not happy with how Westpac or any of the big four banks are performing? Get your free report and discover the five most potentially lucrative income stocks trading on the ASX right now. To download your free copy of ‘Top 5 Dividend Stocks in Australia for 2018’, click here.


Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

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