WBC - Westpac Banking Corporation

[Grimy]

I'm sure dabsman was referring to the tax we pay on any dividend (and the Aussie Franking credits aren't usually that helpful for us in NZ), compared to a buy back where the NTA should go up, meaning the share price should go up, on which we are not paying tax on.

[Snoopy]

Please correct my reasoning here if I've got things wrong - I don't currently understand the buy back offer.

Reading the info on NZ tax (section 2.5, page 20) it suggests that if you don't sell them more than 15% of your holding you need to treat the buy back as a dividend anyway. So I'm not sure of the tax advantage over a dividend.

These buyback offers are designed to minimise tax payments for Australian investors. As an NZ investor you will be tax disadvantaged, and as the offer documents say, the amount of shares bought back will see you incur a tax bill. If you want to get some money out of WBC just sell the shares, that you would have put towards the buyback, on the market. After tax, you will end up with more money. Put the offer straight in the bin. For NZ investors, accepting the offer is a guaranteed way to lose money.

SNOOPY

[Onion]

These buyback offers are designed to minimise tax payments for Australian investors. As an NZ investor you will be tax disadvantaged, and as the offer documents say, the amount of shares bought back will see you incur a tax bill. If you want to get some money out of WBC just sell the shares, that you would have put towards the buyback, on the market. After tax, you will end up with more money. Put the offer straight in the bin. For NZ investors, accepting the offer is a guaranteed way to lose money.

SNOOPY

Thanks Snoopy.

I think I’ll just hold and get the normal dividend. And with the buy back end up with a slightly bigger slice of the pie.

[peat]

These buyback offers are designed to minimise tax payments for Australian investors. As an NZ investor you will be tax disadvantaged, and as the offer documents say, the amount of shares bought back will see you incur a tax bill. If you want to get some money out of WBC just sell the shares, that you would have put towards the buyback, on the market. After tax, you will end up with more money. Put the offer straight in the bin. For NZ investors, accepting the offer is a guaranteed way to lose money.

SNOOPY

I was reading it and my eyebrows just kept going higher and higher!!

The main benefits as outlined appear to be tax driven and yet I thought doing anything purely for tax reduction purposes was considered tax fraud.

This is just weird to me.

[dabsman]

Yep I'll do nothing and the buyback will reduce the shares on offer which of course is better for me as a long term holder. Already paying a lot of tax to fund this lockdown I'm not interested in creating more income because the directors couldnt arrange an on market share purchase plan like ANZ...

[dabsman]

These buyback offers are designed to minimise tax payments for Australian investors. As an NZ investor you will be tax disadvantaged, and as the offer documents say, the amount of shares bought back will see you incur a tax bill. If you want to get some money out of WBC just sell the shares, that you would have put towards the buyback, on the market. After tax, you will end up with more money. Put the offer straight in the bin. For NZ investors, accepting the offer is a guaranteed way to lose money.

SNOOPY

I started reading "sell your shares at a 15% discount.." or whatever it was and nearly died haha

[RTM]

These buyback offers are designed to minimise tax payments for Australian investors. As an NZ investor you will be tax disadvantaged, and as the offer documents say, the amount of shares bought back will see you incur a tax bill. If you want to get some money out of WBC just sell the shares, that you would have put towards the buyback, on the market. After tax, you will end up with more money. Put the offer straight in the bin. For NZ investors, accepting the offer is a guaranteed way to lose money.

SNOOPY

I'm extremely pressed time-wise at the moment. I hold ANZ (breakeven) and WBC (Solid loss) as I don't think they will fail and generally they pay a dividend. Had them for a few years. I see with Oz open they are down another 2.9%. I am extremely interested in topping up at these levels.
Does anyone have any perspective on if this is really dumb ? Or maybe a good idea ? I am a buy and hold long term investor....hence why I have been burnt with these already I guess. Thanks for comments on buy back.

[Onion]

I started reading "sell your shares at a 15% discount.." or whatever it was and nearly died haha

They seem to have a good comedy team in Sydney headquarters.

[Snoopy]

I'm extremely pressed time-wise at the moment. I hold ANZ (breakeven) and WBC (Solid loss) as I don't think they will fail and generally they pay a dividend. Had them for a few years. I see with Oz open they are down another 2.9%. I am extremely interested in topping up at these levels.
Does anyone have any perspective on if this is really dumb ? Or maybe a good idea ? I am a buy and hold long term investor....hence why I have been burnt with these already I guess.

I for many years defended my holding of Oz bank shares against the alternative (as I saw it then) slightly dodgy Heartland Bank (a BBB rated finance company in reality). However after five solid years on the market, and working through the bad debt issues, I found that Heartland had successfully targeted profitable niches where the big banks did not want to tread. In the end the track record became compelling, there were no more excuses not to buy, and I became a 'Heartlander'.

Last time I went in and saw my broker, I got the old line of "banks are a good place to invest in times of rising interest rates blah blah blah."

That stopped me selling any of my ANZ or Westpac shares. But when it came time to supporting the last post Covid-19 Westpac recapitalisation, I stacked that opportunity up against putting that same money into Heartland and chose the latter. History has shown that was a good decision.

I am still, just, a customer of Westpac in New Zealand, although all I have left is a current account which I will move probably to the ANZ. Westpac have a habit of experimenting on their NZ customers, before rolling out 'improvements' to their Australian network. Personally I don't like the way the experiment is going. Westpac have gone from having one of the best nationwide banking networks to now lagging well behind the BNZ and ANZ. I know that sounds a bit 'old school', and that Westpac see themselves morphing more into a virtual bank. But it was annoying under the first lockdown where I found myself on the Kapiti Coast and had to drive 30 minutes to my 'local' bank branch under level 4 when I was meant to be keeping things very local. I have also noticed that what branches do remain open, now have very limited hours - as low as twelve hours per week. I was similarly bemused when Westpac removed my account fee free status and they decided they would charge me for each and every transaction. There was no incentive for me to keep my five grand monthly average balance there going any longer, so I didn't. Even though I read later that Westpac were actually short of cash deposits. This smacks to me of poor management. I have the impression that as a customer, when I turn up personally at a Westpac bank branch, and stand waiting on display in the 'queue of shame', that I am pretty much an annoyance. This is all a personal anecdote of course. But it is entirely consistent with 'Net Promotor Score' information published in Westpac's annual result presentations that shows Westpac right at the bottom for consumer satisfaction for banks in NZ and in Australia. Thankfully, as business bankers, they do perform a little better.

I can see Westpac in the future becoming a specialist business banker and withdrawing from the consumer market entirely, except for maybe a mobile mortgage arm. The problem is these 'safe' old school banks are under attack from category busting start ups on many fronts. The likes of Afterpay taking it to the traditional credit card business for example. Low interest rates have alienated their older term deposit investors, who have sought better returns elsewhere, and will likely not return. This doesn't matter for now with the government underwriting very low cost borrowing. But when interest rates rise again? The wealth business has been largely exited, as the likes of Sharsies move in. Even for commercial loans, the upstart fintechs now have easier to use borrowing approaches that traditional banks find hard to match.

I don't see WBC going bust. But neither do I see it returning to its glory days. I see a tired business, relying on customer lethargy (looking myself in the mirror as I say that) wasting their traditional face to face advantage, thinking it will transform into a start up matching virtual bank, but without the agility of its newer competitors. When WBC realises how little goodwill they have, I can see a much smaller WBC going forwards. That can't be good for customers and eventually it doesn't bode well for shareholders either. I am hanging onto what WBC shares I have for now, even as they become a less and less important part of my overall portfolio. But longer term I see my holdings in NZ based niche finance companies (TRA and HGH) going up, while my Aussie bank holdings go down. The brokers keep ringing out the party line:

"banks are a good place to invest in times of rising interest rates blah blah blah."

But somehow, I just can't see it, with those big banks (especially Westpac) anyway. And I am starting to like more those 'full imputation credits' that the likes of HGH and TRA provide.

SNOOPY

discl: hold ANZ, WBC, HGH, TRA

[RTM]

Thanks Snoopy....food for thought and somewhat echo's my thoughts. My personal experience with WBC is so bad I would not walk in their door again.
However, I do like the Australian exposure it gives me.
And I already hold a decent allocation of the finance company Heartland....8.46% of portfolio. Plenty I think. And Turners...although I have yet to fully decide if that's finance or a car sales company.

Will procrastinate a bit longer.
Back to work !