Total
0
Shares
Westpac (ASX:WBC) - CEO, Peter King
CEO, Peter King
Source: Westpac
Market Herald logo

Subscribe

Be the first with the news that moves the market
  • Banking giant Westpac (WBC) is taking a $1.6 billion impairment charge from COVID-19
  • Westpac is blaming the charge on lower economic growth, higher unemployment, and a decline in housing prices due to the coronavirus
  • Given the outbreak is still in its early stages, however, Westpac said the true impact of the virus is still unknown
  • Speculation has been mounting that Westpac is next in line of the big banks to raise some capital after NAB tapped investors for $3.5 billion yesterday
  • Still, Westpac shares are trading over two per cent higher today, currently worth $14.98 each

Banking giant Westpac (WBC) has revealed a $2.2 billion impairment charge for the first half of the financial year ahead of its upcoming half-yearly report.

Of the $2.2 billion, $1.6 billion is attributed predominantly to COVID-19 related charges.

Westpac said new accounting standards mean it has to estimate future loan defaults before they actually occur, and the $1.6 billion impairment is based on some bleak COVID-19 expectations.

Westpac said it is bracing for some significant blows to economic growth, higher unemployment, lower investment, and a decline in residential and commercial property prices.

On top of this, the banking giant believes there is a high probability economic conditions could fall further than we’ve already seen.

Westpac said the COVID-19 outbreak is still in its early stages — meaning the true impact of the virus on customers and banks is uncertain.

CEO Peter King said the company’s packages are already providing relief to people and businesses impacted by the virus.

“The world is going through a once in a lifetime health and economic crisis and we are committed to assisting as many customers as possible to bridge this shutdown period,” Peter said.

“It is, however, unfortunate that some customers will not be able to navigate the financial and economic changes of this crisis and may not re-open. Nevertheless, we will work closely with those customers to help them through that process,” he said.

Interestingly, the bank said its $1.6 billion COVID-19 impairment only represents a 0.11 per cent impact on its common equity tier one (CET1) capital ratio capital.

However, with speculation already beginning to mount that Westpac will be the next big bank to raise some capital, today’s news might be lifting investors’ eyebrows.

Yesterday, NAB announced a hefty $3.5 billion capital raise to help offset the impact of COVID-19. Westpac is expected to follow suit.

The company’s first-half financial results are expected to be announced on May 4.

Still, it’s a happy day for our banking stocks despite Westpac’s news. Shares in Westpac are currently trading 2.15 per cent higher at $14.98 each.

WBC by the numbers
More From The Market Herald

" Forrest rejects “Wait Awhile” state as home for hydrogen project

Fortescue Metals Group (FMG) Chairman Andrew Forrest said Western Australian was the first choice for the Fortescue Futures Initiative (FFI) hydrogen project, but

" Qantas (ASX:QAN) brings forward international flights to Nov 1

Qantas (QAN) will begin international flights two weeks earlier than planned, on November 1, 2021, after the Federal and New South Wales governments
Insurance Australia Group (IAG) - MD and CEO, Nick Hawkins

" ASIC sues Insurance Australian Group (ASX:IAG) for misleading discounts

Insurance Australia Group (IAG) shares are sinking today after the corporate watchdog announced civil action against an IAG subsidiary for failing to honour

" Rio Tinto (ASX:RIO) cuts 2021 iron ore shipments over “tight labour market”

Rio Tinto (RIO) has cut its expected iron ore shipments for 2021 as Western Australia’s constricted labour force delays the completion of two