Headwinds hitting capital at Australia's Westpac ahead of January deadline
* No. 2 bank says minimum capital levels under pressure
* Dividend cut on cards to meet capital requirement -
* Westpac reports higher 90+ day delinquencies,
(Recasts with capital detail)
By Paulina Duran
SYDNEY, Aug 19 (Reuters) - Australia's Westpac Banking Corp
on Monday said the number of people missing mortgage
payments was rising and its capital levels were under pressure,
sparking concerns among some analysts about its ability to meet
Australia's four biggest banks must maintain a minimum core
capital ratio of 10.5% from Jan. 1, 2020. Westpac, the country's
second-largest, and its smaller rival National Australia Bank
are lagging Commonwealth Bank and Australia
and New Zealand Banking Group in meeting the
Westpac said its core capital ratio inched down to 10.5% at
the end of the June quarter, exactly the level required by the
Australian Prudential Regulation Authority (APRA) from January.
New accounting rules and an increase to its operational risk
capital would reduce its capital ratio by 44 basis points in
coming months, convincing analysts the bank must implement
capital management initiatives to meet the deadline.
"It does reinforce our view that the (second half dividend)
will likely be cut to support Westpac's efforts to meet APRA’s
10.5% 'unquestionably strong' minimum" by Jan. 1, Goldman Sachs
analysts said in a note to clients.
Other possibilities could be asset sales, or dividend
reinvestment plans offering discounts to investors who reinvest
their dividend in shares rather than require cash payments.
Westpac also said 90-plus-day delinquencies, the overall
percentage of loans that are about three months overdue, were up
8 basis points over the third quarter to 0.9%, amid a soft
housing market. That was the highest level among Australia's top
four lenders, which was also partly due to a higher portion of
people now due to repay their loans rather than just paying
Australia's housing market has been under immense strain,
with housing prices having fallen every month since late 2017.
But encouraging signs of higher demand in June from Sydney and
Melbourne have spurred hopes that things may be improving.
"Softness in property market contributing to an increase in
the time it takes to sell a property have contributed to the
rise in delinquencies and properties in possession," Westpac
said in a statement.
Properties in possession now sit at 550, a jump of 68 over
Many hope back-to-back rate cuts in the past couple of
months may boost consumer sentiment across the housing market,
which may also get a lift from recently passed tax cuts.
Stressed assets rose in the third quarter by 10 basis points
to 1.2%, the lender said in a limited third-quarter update.
(Reporting by Paulina Duran in Sydney; additional reporting by
Nikhil Kurian Nainan and Devika Syamnath in Bengaluru; Editing
by Stephen Coates)
First Published: 2019-08-19 00:43:46
Updated 2019-08-19 04:58:30
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