WBC - Westpac

[Bjauck]

Okay, this is something I've never quite managed to get straight in my own mind:

WBC shares listed in Australia pay dividends with full Australian franking credits.

WBC shares listed in New Zealand pay dividends without full New Zealand imputation credits.

Which means, in theory, that WBC shares listed in Australia are more valuable to Australian shareholders than WBC shares listed in New Zealand are to New Zealand shareholders...

All shareholders are treated the same whether they have the Australian or NZ listed shares. The NZ and Australian imputations credits are attached to all dividends no matter where the shareholders reside and no matter where their shares are listed.

Only NZ residents can utilise their share of the NZ Imputation credit. As NZ business represents a smaller percent of the Group turnover, then we can only expect an imputation credit per share commensurate with that.

That is a drawback of NZ business being run by overseas companies. Less of the total imputation credit for NZ tax tax paid ends up being utilised by NZ resident shareholders. Overseas shareholders get credits, but cannot utilise them.

[traineeinvestor]

@ Snoopy - Thanks for the detailed response. I was aware that WBC NZ listed shares carry partial imputation credit (which is why is phrased it as "do not carry full imputation credits). I'm also aware that imputation/franking credits have no value outside NZ/Au respectively. Your reminder that NZ investors want international exposure combined with the partial imputation credits appears to be the missing piece and explains why there hasn't been a steady migration of WBC shares from NZX to ASX – I guess I've been away too long.

@ Snoopy and Bjauck – As a non-resident shareholder, imputation and franking credits do matter to me. If there's no imputation credits (provided via a paper supplemental dividend) on NZ shares I lose 30% to NRWT. The same happens in Australia with franking credits. If I understand correctly, a company must utilise its available imputation credits to pay a supplemental dividend to overseas shareholders to avoid deducting NRWT.

The imputation/franking of dividends is one of the first things I look at when evaluating an investment. This is why, when units in Westpac Trust were swapped out for NZX listed WBC shares I shifted my shares to ASX.

Thanks to you both for taking the time to reply.

[traineeinvestor]

The UK regulator has issued an edict banning the large banks and building societies from paying dividends in 2020 (including already declared dividends from 2019 profits), conducting share buy backs or paying staff bonuses.

Any thoughts on whether the Australian regulator might do the same?

[dabsman]

The UK regulator has issued an edict banning the large banks and building societies from paying dividends in 2020 (including already declared dividends from 2019 profits), conducting share buy backs or paying staff bonuses.

Any thoughts on whether the Australian regulator might do the same?

https://i.stuff.co.nz/business/12075...rbnz-announces

[macduffy]

That's in respect of dividends paid by NZ banks to their Australian parent banks. Now we wait to see what, if any, dividends the parents pay to their shareholders, including NZ shareholders of course.

[Tomtom]

Interesting, many people have seen bank shares as consistent dividend payers and invested in them for this reason. So will banks just use buybacks or just declare ex-dividends as per usual and set the payable date forwards a year?

[traineeinvestor]

Interesting, many people have seen bank shares as consistent dividend payers and invested in them for this reason. So will banks just use buybacks or just declare ex-dividends as per usual and set the payable date forwards a year?

I'm pretty sure there won't be any buy-backs if dividends aren't allowed.

Since dividends are usually paid based on past profits and management's future expectations for capital needs etc, I would be very surprised if they declared dividends a year in advance.

It's a real issue in Australia given that the extent to which the big 4 banks have become the staples of self-managed retirement funds.

[macduffy]

I'm pretty sure there won't be any buy-backs if dividends aren't allowed.

Since dividends are usually paid based on past profits and management's future expectations for capital needs etc, I would be very surprised if they declared dividends a year in advance.

It's a real issue in Australia given that the extent to which the big 4 banks have become the staples of self-managed retirement funds.

And in NZ where I expect that they feature in many Kiwisaver and other managed funds.

[kiwico]

All shareholders are treated the same whether they have the Australian or NZ listed shares. The NZ and Australian imputations credits are attached to all dividends no matter where the shareholders reside and no matter where their shares are listed.

Only NZ residents can utilise their share of the NZ Imputation credit. As NZ business represents a smaller percent of the Group turnover, then we can only expect an imputation credit per share commensurate with that.

That is a drawback of NZ business being run by overseas companies. Less of the total imputation credit for NZ tax tax paid ends up being utilised by NZ resident shareholders. Overseas shareholders get credits, but cannot utilise them.

Agree completely. I have a few on both exchanges for some reason - for those that want a gander the ASX info looks this and the NZX like this.

[Snoopy]

The 24th November 2019 Westpac press release indicates that Westpac still expect to be fined, for not having the necessary checks on some accounts. However they have rolled out the following $54m dollars worth of 'good corporate citizen' measures:

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1/ Funding for the International Justice Mission (IJM): Westpac will match IJM's current level of funding, investing $18 million over three years to tackle Online Sexual Exploitation of Children (OSEC) in the Philippines. This will enable IJM to expand on-the-ground initiatives in Southeast Asia to help end child exploitation.

2/ Funding for SaferKids: Westpac will match the Australian Government's current level of funding for its SaferKids partnership with Save the Children, UNICEF and The Asia Foundation, investing $6 million over six years to raise awareness of Online Sexual Exploitation of Children (OSEC) and support programs to protect children in the Philippines.

3/ Prevention: Westpac will seek the guidance of industry experts, through the convening of an expert advisory roundtable, to develop a program of actions to support the prevention of online child exploitation. Westpac will provide funding of up to $10 million per year for three years to implement these recommendations

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In house,

1/ Westpac have closed their "Westpac Australasian Cash Management Product" and "LitePay international funds transfer system". These were two platforms where funds could be transferred with little accountability.

2/ Westpac intend to hire an additional 200 people to add to their financial crime resourcing team. This team has already been boosted by 325, to 750 people over the last three years.

3/ Westpac will invest $25 million to improve cross-border and cross-industry data sharing and analysis to better support regulators and authorities to fight financial crime

Those financial <script src="https://securepubads.g.doubleclick.net/gpt/pubads_impl_2020032401.js" id="gpt-impl-0.981356852904373" nonce=""></script>commitments add up to $79m, excluding Westpac's own incremental internal costs.

The 25th November 2019 Westpac press release contains more details on Westpac's costs for the full support of the anti-pedophile program:

"Westpac has made a number of commitments including to improve its financial crime program, support industry initiatives to enhance financial crime monitoring and provide additional support and resources to organisations that are working to eradicate child exploitation. We estimate these commitments will increase expenses by up to $80 million (pre tax) in FY20 when the majority will be incurred or provided for. These expenses will be included in cash earnings and treated as notable items."

The 'notable items' comment is made in relation to the whole thing being a 'non-operational matter." I would not include it as part of 'normalised earnings'.

I am not sure what kind of fine Westpac may expect as a result of their prior inactions, to be offset by their subsequent make good efforts at least in a judge's eye. I don't think they will get away with a wet bus ticket though. But given that Westpac was a conduit for crime rather than doing the crime themselves, I wonder if it will be somewhat in the order of $20m? That would see Westpac face a total cost of $80m + $20m = $100m for the whole matter. $100m sounds like a good 'headline punishment' to face. Anyone know how this figure compares with existing court precedents?

According to the comment at the end of this article, my total $100m paedophile fine settlement could be some way out:

https://www.finextra.com/newsarticle...undering-rules

"23 million breach occasions @ A$17 - A$21 million penalty per breach occasion is A$391 trillion - A$ 483 trillion."

To put that into perspective, total shareholder funds on hand at EOFY2019 was $65 billion. So potentially WBC could be fined over:

391/0.65 = 600

times the amount of shareholder funds on the balance sheet! That sounds like crazy stuff that would immediately collapse the bank. Hyperbolic surely?

SNOOPY