Westpac share price on watch following $1.3b earnings hit

Notable items will leave a sizeable dint in the bank's second-half earnings.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • The Westpac share price could be in for a big day on Tuesday. It closed Monday's session at $23.87
  • The bank revealed $1.3 billion of post-tax impacts from notable items to be included in its upcoming half-year earnings after Monday's close
  • Much of that was due to the $1.1 billion loss from the sale of the bank's life insurance business to be recognised next month

The Westpac Banking Corp (ASX: WBC) share price will be in focus on Tuesday after the bank revealed a $1.3 billion hit to its half-year earnings.

The hit – born from notable items, including a loss on the sale of Westpac Life Insurance – will dint the S&P/ASX 200 Index (ASX: XJO) bank's second-half net profit and cash earnings.

Westpac revealed the upcoming impact after the market closed on Monday. The bank's stock ended Monday's trade at $23.87.

Let's take a closer look at the news that might drive the Westpac share price on Tuesday.

A corporate executive in a suit and wearing boxing gloves slumps in the corner of the ring representing the battered Zip share price and consideration reportedly being given to dumping the company's UK operations

Image source: Getty Images

Westpac share price in focus on $1.3b impact

The Westpac share price could be one to watch after the bank announced its second-half results will include a significant dint.

Much of the $1.3 billion post-tax hit from notable items relates to the sale of its life insurance business.

The bank completed the sale of the business to a Dai-ichi Life Group subsidiary for $900 million in August.

That saw Westpac recognise a $1.37 billion loss, $270 million of which impacted its financial year 2021 earnings. The other $1.1 billion will be recognised in its results for the second half of financial year 2022.

Other notable items resulted from:

  • The sale of Advance Asset Management and successor funds transfer of BT's personal and corporate superannuation funds
  • The sale of the bank's motor vehicle and its vendor finance businesses
  • Shrinking the bank's corporate and branch footprint
  • Higher provisions for customer refunds, associated costs, and litigation costs

Most of the notable items were previously disclosed to the market as divestments were announced.

They left a positive 12 basis points impact on the bank's common equity tier 1 capital ratio. The completion of the life insurance sale added 17 basis points, while the other notable items had a 5 basis point impact.

The $83 billion banking giant will release its full-year results on 7 November.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A man in his 30s with a clipped beard sits at his laptop on a desk with one finger to the side of his face and his chin resting on his thumb as he looks concerned while staring at his computer screen.
Bank Shares

Forget CBA shares — here are 2 ASX bank shares I'd rather own right now

CBA shares are trading in the green again today, but I'd still pick these two ASX bank shares instead.

Read more »

Nervous customer in discussions at a bank.
Bank Shares

Why are NAB shares sinking 4% on Monday?

Let's see what NAB has announced on Monday.

Read more »

A woman wearing a yellow and white striped top and headphones plays excitedly with her phone.
Bank Shares

5 reasons to invest $500 in CBA shares

For long-term investors, reliability and scale can matter more than short-term valuation.

Read more »

Australian dollar notes and coins in a till.
Dividend Investing

How many ANZ shares do I need to buy for $10,000 a year in passive income?

ANZ shares have a lengthy track record of paying two dividends a year.

Read more »

View of a business man's hand passing a $100 note to another with a bank in the background.
Bank Shares

In the midst of economic turmoil, what does Morgan Stanley say the ASX banks are worth?

The economic headwinds are building.

Read more »

Three children wearing athletic short and singlets stand side by side on a running track wearing medals around their necks and standing with their hands on their hips.
Bank Shares

ANZ, NAB, Westpac, and CBA shares: Analysts rate 3 to sell, and 1 to buy

One ASX bank stock stands out from the rest.

Read more »

Three businesspeople leap high with the CBD in the background.
Bank Shares

Macquarie shares soar 21% to a 52-week high: Buy, sell or hold?

The investment bank's shares climbed higher again on Wednesday. Here's what analysts expect from the stock next.

Read more »

Woman leaping in the air and standing out from her friends who are watching.
Bank Shares

$5,000 invested in CBA shares two years ago is now worth…

It shows you don’t need high-risk growth stocks to build wealth.

Read more »