Westpac share price drops after losing chance of government contract

The Westpac Banking Corp (ASX:WBC) share price has fallen after it lost the opportunity to be part of a new government scheme.

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The Westpac Banking Corp (ASX: WBC) share price is down 0.80% at the time of writing after losing the opportunity to be a part of a new government scheme.

According to News reporting, Westpac was about to be chosen as one of the two big four ASX banks that would offer mortgages through the Federal Government's first home loan deposit scheme. The idea of the scheme is that low and middle earners can buy a property without having a large deposit.

But, only National Australia Bank Ltd (ASX: NAB) has been picked to be part of the process. The transaction reporting scandal that has surrounded the bank and cost the CEO his job is now having negative real world consequences.

Instead of Westpac, Australia and New Zealand Banking Group (ASX: ANZ) or Commonwealth Bank of Australia (ASX: CBA) will be chosen to be part of the scheme.

Westpac CEO Brian Hartzer said in private, according to The Australian, that the whole thing "is not a major issue" for the everyday Aussie, and that as a result, "we don't need to overcook this". Not a good PR look when the major bank is in damage control.

There are some large 'ethically-aware' institutional investors who have questioned whether they can continue holding Westpac. With the exit of the CEO and the earlier retirement of the chairman it probably means some of those investors will be satisfied.

Foolish takeaway

The AUSTRAC fine of $700 million for CBA will probably be materially eclipsed by what is coming Westpac's way because of the child exploitation element that's involved. It's a painful hit to Westpac shareholders at a time when the dividend has already been cut because of the royal commission. I'm glad I don't own shares at the moment.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.

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