Why Westpac’s Share Price Has Dropped 5% Today

At time of writing, shares of Westpac Banking Corp [ASX:WBC] have dropped in value by 5% today, trading at $26.33 apiece.

Like the other big four banks, its share price has tumbled over the year due to the Banking Royal Commission:

Westpac Share Price

Source: marketindex.com.au

Westpac’s share price is suffering from two things — the fact that it is trading ex-dividend and a new court ruling that indicates its fine for dodgy lending practices may nearly triple.

WBC is one of the five fatal stocks we detail in this free report. Download here to get the names.

Trading ex-dividend and new court ruling impacting WBC’s share price

Stocks typically trade lower when they are ex-dividend. But today’s most recent and sizable movement could be closely tied to a new court ruling.

Today, Justice Nye Perram of the Federal Court declined to approve the $35 million settlement between ASIC and Westpac.

The initial fine was based on Westpac’s admission that it used the Household Expenditure Measure (HEM), instead of evaluating the customers’ actual expense information.

Around 10,500 home loans under this scheme should not have been approved.

Now, former solicitor-general Justin Gleeson, SC, who was added as an amicus curiae to advice Justice Perram, has argued that Westpac should pay at least a $100 million fine.

This news comes as a blow to the company who has just announced a new notes issue to comply with APRA’s new capital rules. These rules recently hurt the share price of National Australia Bank Ltd [ASX:NAB].

While Australia and New Zealand Banking Group Ltd [ASX:ANZ] has recently moved to tighten its mortgage lending rules.

Westpac share price may be under pressure for a while longer

With a cloud still over it, the prospects of an increased fine and future punishments emanating from the Banking Royal Commission, Westpac may struggle for the foreseeable future.

With Westpac and the other big four banks all facing reduced net interest margins, profits have been stagnating or declining.

The likelihood of a credit crunch occurring has also increased as Australia will eventually have to face consequences for its interest rate differential with the US.

For now it could be a good idea to avoid shares of Westpac, or at least until the regulatory environment is clearer.


Lachlann Tierney,
For Markets & Money

PS: Along with WBC, there are four other fatal stocks to avoid in our detailed free report. Get the names here.


Lachlann Tierney is a writer for Markets & Money. He has lived and studied in the US, the UK, and Australia. With an MSc from London School of Economics (LSE) he brings a strong grasp of geopolitics and world affairs to his analysis. Lachlann is always on the lookout for the news that will give you an edge in tomorrow’s markets.

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