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Thread: WBC - Westpac

  1. #131
    ShareTrader Legend Beagle's Avatar
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    https://www.marketscreener.com/WESTP...63/financials/
    Forward FY20 PE is 12.7.

    Not sure why anyone would want to go there ??? with HGH who don't have all these issues on a forward PE of just 12.2 by comparison.
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  2. #132
    percy
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    Quote Originally Posted by macduffy View Post
    ABC"s comment:

    https://www.abc.net.au/news/2019-11-...tions/11738642

    I take your point, percy, but confess that I'm tempted. Remember Westpac's lending crisis of the late 80's/early 90's when they were forced into a heavily discounted rights issue? Fortunes were made then...…….
    A good friend did well out of that rights issue, and is preparing to front up to this one.Like you he has a good memory.
    He is not talking to me, since I told him I thought he should buy more PAZ rather than WBC..!!.....lol.

  3. #133
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    Default An unorchestrated 'litigation lot' of liabilities: Part 1

    Quote Originally Posted by macduffy View Post
    ABC"s comment:

    https://www.abc.net.au/news/2019-11-...tions/11738642

    I take your point, percy, but confess that I'm tempted. Remember Westpac's lending crisis of the late 80's/early 90's when they were forced into a heavily discounted rights issue? Fortunes were made then...…….
    I am ashamed to say I am a Westpac shareholder, who has taken his eye off the ball. I have to admit that most of my investment energy is expended on the NZX and my other holdings tend to be 'buy and hold' investments representing sectors I cannot invest in via the NZX. But I guess that is no real excuse.

    'The bank that may have facilitated pedophiles'

    doesn't sound like a great marketing campaign line.

    AUSTRAC (The Australian Transaction Reports and Analysis Centre) is investigating and

    "Any enforcement action against Westpac may include civil penalty proceedings and result in the payment of a significant financial penalty which Westpac is currently unable to reliable estimate." (AR2019 p255)

    But perhaps even more damaging financially and reputationally is the less headline grabbing legal issues that relate to the way that Westpac's own initiated business practices permeate their core business. Westpac disclose the 'live legal cases' they now face in AR2019, p255 to p256:

    1/ ASIC (Australian Securities and Investigation Commission) March 2017 case against contraventions of the 'National Consumer Credit Protection Act'. against certain interest only home loans. The case has been dismissed on 13-08-2019 but ASIC has appealed. No provision has been recognised in WBC accounts in relation to this matter.

    2/ ASIC December 2016 case against personal advice given in contravention of a number of Corporation Act 2001 provisions, largely in relation to the consolidation of Superannuation accounts at 'BT Funds Management Limited' and 'Westpac Securities Administration Limited'. On 28-10-2018 the Full Federal Court ruled in ASICs favour. The matter has yet to be remitted for penalty. No provision has been recognised in WBC accounts in relation to this matter.

    3/ ASIC August 2016 case filed in the United States against Westpac and other international banks alleging misconduct in relation to the bank bill swap reference rate. The original case was dismissed on a technicality, but it was refiled in revised form in May 2019. No provision has been recognised in WBC accounts in relation to this matter.

    4/ An October 2017 class action was filed in the Supreme Court of Australia against Westpac and Westpac Life Insurance alleging advisors breached their fiduciary duties by not acting in the best interests of their clients. These actions are currently stayed by the courts as a result of a procedural matter. No provision has been recognised in WBC accounts in relation to this matter.

    5/ A February 2019 class action was filed against Westpac, claiming that Westpac did not comply with responsible lending obligations for certain home loans that it should have assessed as unsuitable. No provision has been recognised in WBC accounts in relation to this matter.

    6/ A September 2019 class action against 'BT Funds Management Limited' (BTFM) and 'Westpac Life Insurance Services' (knowingly concerned with the former). It is alleged that BTFM charged excessive fees and mismanaged investments. No provision has been recognised in WBC accounts in relation to this matter.

    Note that the common thread amongst all of these court cases is that no specific provision has been made for any of them! This is not because Westpac believes they have no chance of succeeding. Item 2 has already been lost after all. It is because estimating any consequent losses is too difficult.

    I wonder if, nevertheless, the recent capital raising was an attempt to provide some provisioning against all of this, albeit in an as yet unformalised and unallocated way?

    SNOOPY
    Last edited by Snoopy; 15-02-2020 at 05:24 PM.
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  4. #134
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    Default The cost of a deposit guarantee: Part 1

    Quote Originally Posted by Snoopy View Post
    Note that the common thread amongst all of these court cases is that no specific provision has been made for any of them! This is not because Westpac believes they have no chance of succeeding. Item 2 has already been lost after all. It is because estimating any consequent losses is too difficult.
    Having said Westpac have shied away from estimating some serious legal downside costs, I noticed one area of small print where they have put their hand up. From p257 AR2019

    "The Financial Claims Scheme (ADIs) Levy Act 2008 provides for the implementation of a levy to fund the excess of certain APRA FCS costs connected to an ADI (Authorised Deposit taking Instituition) including payments by APRA to deposit holders in a failed ADI. The levy would be imposed on liabilities of eligible ADIs to their depositors and cannot be more than 0.5% of the amount of these liabilities."

    This money will go into a pot that will guarantee bank depositors in approved ADIs up to $250,000 worth of their deposits back (significantly better than the $50,000 ceiling guaranteed in NZ I note), should their ADI get into trouble.

    Now for those that get confused by 'banker speak', it is we depositors when we stick our money in the bank that create this kind of bank liability. So it is we depositors who ostensibly fund this, even though it is up to the bank to collect this money from us.

    The paragraph ends

    "A contingent liability may exist in respect of any levy imposed under the Financial Claims Scheme."

    This implies that this levy, despite being legislated for, has not been collected. But if the Federal Government wanted to collect this levy, how much would Westpac have to pay annually? If we take the amount of money in the Australian arm of the business from customer deposits as a guide, then I calculate an annual levy of up to:

    0.5% x $464,254m = $2,321m per year

    Yes that is right. $A2.3 billion each and every year as a levy (c.f. cash profit for FY2019 of $6.849billion) ! If ever there was a hidden sword of damocles hanging over the Westpac business model, this must be it. But will the Federal government ever implement a levy as draconian as this? And will such a levy in implemented be an annual charge or a one off?

    SNOOPY
    Last edited by Snoopy; 04-04-2020 at 09:50 AM.
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  5. #135
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    i dont quite see how you can associate the banker with the crime. Sure they broke AML laws but they didnt do pedo.
    Are reserve banks (issuers of coin and notes) responsible for drug deals that go on with their cash. ?
    For clarity, nothing I say is advice....

  6. #136
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    Quote Originally Posted by peat View Post
    i dont quite see how you can associate the banker with the crime. Sure they broke AML laws but they didnt do pedo.
    Are reserve banks (issuers of coin and notes) responsible for drug deals that go on with their cash. ?
    Bankers know a lot about their customers and their spending habits. Some say they can identify if your bankcard and security code is stolen by flagging as few as two to three transactions. Banks also have anti-money laundering responsibilities and are required to look out for proceeds of crime. I guess some banks take their responsibilities more seriously than other banks. It appears only Westpac facilitate the funding of Pedophile rings on a large scale. Other banks put Children above profit. I wonder if Ron Brierley banks with Westpac?

    SNOOPY
    Last edited by Snoopy; 15-02-2020 at 05:21 PM.
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  7. #137
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    Bankers cant - algorithms can. A banker cant tell if 10,000 pesos is send to pay for abuse or to help a partners family back in the Philippines. AML doesnt help either to be fair

  8. #138
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    Default The cost of a deposit guarantee: Part 2

    Quote Originally Posted by Snoopy View Post
    "A contingent liability may exist in respect of any levy imposed under the Financial Claims Scheme."

    This implies that this levy, despite being legislated for, has not been collected. But if the Federal Government wanted to collect this levy, how much would Westpac have to pay annually? If we take the amount of money in the Australian arm of the business from customer deposits as a guide, then I calculate an annual levy of up to:

    0.5% x $464,254m = $2,321m per year

    Yes that is right. $A2.3 billion each and every year as a levy (c.f. cash profit for FY2019 of $6.849billion) ! If ever there was a hidden sword of damocles hanging over the Westpac business model, this must be it. But will the Federal government ever implement a levy as draconian as this? And will such a levy in implemented be an annual charge or a one off?
    A bit more on this 'Financial Claims Scheme' they have in Australia

    https://www.apra.gov.au/financial-cl...-policyholders

    From the above link:

    -------

    How is the scheme funded?

    If the Government activates the FCS, initial FCS funding will be provided by the Government in order to facilitate timely payments to account holders.

    Amounts paid under the FCS and associated administration costs would then be recovered through the liquidation process through a priority claim. Any shortfalls through the liquidation would subsequently be recovered by the Government through an industry special levy.

    ------

    It does look like this levy is an 'after the event' procedure. If an Approved Deposit taking Institution was liquidated, then:

    1/ Government pays out deposit holders. (Up to $250k under the one banking licence in trouble).
    2/ Government liquidates the ADI to recover its money.
    3/ Government imposes an industry levy to recover any shortfall.

    So this FCS levy that might be applied to Westpac would be to pay out depositors from another industry player that has been liquidated. As Westpac shareholders, this is outside our control unless of course it is Westpac itself that end up in liquidation. But as Westpac shareholders, we will already be 'down the dunny' by that stage: no 'levy' to worry about!

    SNOOPY
    Last edited by Snoopy; 26-01-2020 at 09:28 PM.
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  9. #139
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    Default An unorchestrated 'litigation lot' of liabilities: Part 2

    Quote Originally Posted by Snoopy View Post
    Note that the common thread amongst all of these court cases is that no specific provision has been made for any of them! This is not because Westpac believes they have no chance of succeeding. <snip> It is because estimating any consequent losses is too difficult.

    I wonder if, nevertheless, the recent capital raising was an attempt to provide some provisioning against all of this, albeit in an as yet unformalised and unallocated way?
    I have done a bit more homework on this topic.

    From AR2019 p84, the 'non-interest income' decrease year on year is explained.

    There was a "$657 million decrease from provisions for estimated customer refunds , payments, associated costs and litigation."

    So although there is no specific provision for the avalanche of court cases pending against Westpac, there is $657m available already to make litigation related payments.

    Specifically for Wealth Management and Insurance we learn that a separate $531m has been set aside as

    "...additional provisions for estimated customer refunds, payments , associated costs, and litigation (mostly related to financial planning)."

    That all adds up to a reduction in non interest income for FY2019 of:

    $657m + $531m = $1,188m

    Separate to all of this, there has been much scrutiny of the payment of senior managers including the CEO. From AR2019 p56:

    "Cash earnings were also impacted by provisions for estimated customer refunds, payments associated costs and litigation, as well as costs associated with the restructuring of the Wealth business. Excluding the impact of these items Westpac's cash earnings were $7,979m."

    From AR2019 p2 the declared cash earnings for FY2019 were $6,849m. The difference in these two figures indicates the one off provisioning against the now largely discontinued wealth business.

    $7,979m - $6,849m = $1,130m

    This is $58m less than the total restructuring costs I calculated above. My explanation for this discrepancy is that, of the $531m set aside against 'Wealth Management and Insurance', $58m must have been for the continuing 'Insurance' side of 'Wealth Management and Insurance'.

    It may end up not being enough. But $657m + $473m = $1.130 billion set aside over the last financial year to address these remediation and litigation issues is a significant start. More detailed information of how that $1,130m was accounted for over FY2019 may be found in AR2019 p95.

    SNOOPY
    Last edited by Snoopy; 30-07-2020 at 07:19 PM.
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  10. #140
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    so theres a whole yard set aside then Snoopy!
    already! even when making those billions of profit every year. Wow what a fantastic business it must be!
    For clarity, nothing I say is advice....

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