Westpac completes $3.5bn share buyback, says capital position remains strong
Westpac has ruled off its $3.5bn off-market share buyback to shareholders, just days after CBA announced it would return further capital to investors.
Westpac has ruled off a $3.5bn off-market share buyback, just days after larger rival Commonwealth Bank announced it would return a further $2bn in capital to investors.
Westpac told the ASX the buying back of shares would see its common equity tier one capital ratio decline by 79 basis points, from the 12.2 per cent reported as at December 31.
The return of funds to investors comes amid a broader capital return frenzy by the big four banks over the past eight months. They have been returning capital to shareholders due to lower than expected loan losses stemming from the pandemic, and to hand back proceeds from a spate of divestments in the past three years.
Westpac chief financial officer, Michael Rowland, said the bank was pleased to have completed the buyback, which reduced the number of shares outstanding by 4.6 per cent of issued capital.
“The buyback improves our capital efficiency, returns franking credits and reduces our share count for the benefit of all shareholders. Westpac’s capital position remains strong after completing this buyback,” he added.
Westpac bought back 167.5 million shares at $20.90, reflecting a 6 per cent discount to the five-day volume-weighted share price to February 11. The bank’s stock on Monday closed 4.8 per cent higher at $23.88.
Monday’s statement noted a scale back in applications for the share buyback.
“In line with the terms of the original booklet and supplementary booklet, the scale back policy was designed to minimise any disadvantage to shareholders with a small number of shares,” the bank said.
Macquarie Group’s banking analysts said net interest margin compression was weighing on Westpac’s revenue performance, but the bank was making progress on costs.
“Pleasingly, Westpac’s expenses started to decline, and it appears that WBC has begun to turn the corner,” they said.
CBA last week flagged a fresh $2bn buyback, which followed a $6bn capital return via a buyback in 2021. Last year’s buyback was subject to bumper demand and had $18bn in scale backs of investor applications.
The latest buyback is expected to see CBA’s common equity tier one ratio fall to 11.4 per cent.
ANZ initiated the sector’s capital management wave in July last year, announcing it would return up to $1.5bn through a buyback. NAB followed with a $2.5bn buyback, despite raising capital from investors in 2020 on the back of fears of how Covid-19 would sweep through the economy.
Westpac on Monday said an Australian Taxation Office class ruling was expected to confirm the capital component of the buyback price at $11.34 and the fully franked dividend portion of it at $9.56.
Payments for shares bought back under the program start on February 18.
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