Here's why Westpac Banking Corp (ASX:WBC) investors should be cautious

AMP Limited (ASX: AMP) has just lost a big customer and it could have implications for Westpac Banking Corp (ASX: WBC)

| More on:
a woman

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

It never rains but pours for investors in AMP Limited (ASX: AMP).

The Australian Financial Review reported on Monday that Australia Post had decided to drop AMP as the default superannuation service provider for its employees.

While that news relates to AMP, I think it has implications for the big four banks Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB).

That's because according to the AFR, workers' unions were, "running a widespread 'ban banks from super' campaign to pressure the government into banning banks from operating super funds."

Whether that proceeds or not is for speculators to decide but the fact of the matter is that Westpac is the only big four bank that has not yet announced plans to sell or demerge from its wealth management arm.

It comes at a time when there are significant regulatory headwinds for these businesses and the other big banks have clearly decided that having a wealth management arm might not be the best strategy going forward.

What now?

I think that whilst it might not be enough reason to sell Westpac shares (particularly for income-focused shareholders), investors should still consider how much exposure they have to the company and avoid being overweight on Westpac shares.

Contrarian view

One contrarian view that's also worth considering is that Westpac might be playing the long game because now might not be the best time to sell your wealth management arm if everyone else is doing exactly the same thing.

As such, it might be a better strategy to take the short-term pain and only divest from wealth management when market conditions have changed.

Whether that turns out to be a good strategy or not, only time will tell but I think there might be better investment opportunities out there such as these three revolutionary companies.

Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned. You can find Kevin on Twitter @KevinGandiya. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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 a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

How much passive income could I earn from Westpac shares

Is the bank a good option for income investors? Let's find out.

Read more »

A large clear wine glass on the left of the image filled with fifty dollar notes on a timber table with a wine cellar or cabinet with bottles in the background.
Dividend Investing

Which of the big 4 ASX 200 bank stocks paid the most passive income in 2025?

Just how much passive income did the ASX 200 banks like CBA pay in 2025?

Read more »

A group of people sit around a table playing cards in a work office style setting.
Bank Shares

Will 2026 be make-or-break for the Westpac share price?

Westpac’s turnaround has been real. Whether it can now justify its valuation is the key question for 2026.

Read more »

Calculator on top of Australian 4100 notes and next to Australian gold coins.
Bank Shares

Here's the dividend forecast out to 2028 for CBA shares

This ASX bank share is expected to see bigger payouts…

Read more »

A pink piggybank sits in a pile of autumn leaves.
Bank Shares

Australian Bank Stocks: Which ones look like a buy (and which don't)

Is there any upside for bank shares?

Read more »

Friends at an ATM looking sad.
Bank Shares

Could 2026 be the year when CBA stock implodes?

I think CBA's glory days are over.

Read more »

A man thinks very carefully about his money and investments.
Bank Shares

CBA shares returned just 4.9% last year. Should investors look elsewhere?

With peers racing ahead, is the big bank now fully priced?

Read more »

A mature aged man with grey hair and glasses holds a fan of Australian hundred dollar bills up against his mouth and looks skywards with his eyes as though he is thinking what he might do with the cash.
Bank Shares

If I invest $10,000 in Westpac shares, how much passive income will I receive in 2026?

Can investors bank on good dividend income from Westpac in 2026?

Read more »