The Westpac Banking Corp (ASX: WBC) share price has been a poor performer on Wednesday.
In late afternoon trade, the banking giant’s shares are down 1% to $24.18.
Why is the Westpac share price under pressure?
There are a couple of reasons for the weakness in the Westpac share price today.
The first was news this morning that the Reserve Bank of New Zealand (RBNZ) has instructed Westpac New Zealand to commission two independent reports concerning its risk governance and liquidity risk management.
In addition to this, the RBNZ has told Westpac that its New Zealand business will have to hold additional liquid assets until the central bank is satisfied that the previously required remediation work has been effective.
Adding extra pressure to the Westpac share price was a broker note out of Macquarie this morning.
According to the note, the broker has downgraded the bank’s shares to a neutral rating with a price target of $25.75. This was made largely on valuation grounds following a strong gain in recent months.
Combined, this has offset a potentially positive announcement out of the bank this afternoon relating to the aforementioned New Zealand business.
What did Westpac announce?
This afternoon Westpac announced that it is reviewing its New Zealand business and assessing whether a demerger would be in the best interests of shareholders. This is part of its fix, simplify, and perform strategy.
According to the release, the bank is in the very early stage of this assessment and no decisions have been made.
The company notes that Westpac NZ is a valuable part of the Westpac Group and has been for over 160 years. The business continues to perform well with a strong position in retail and commercial banking.
However, due to the changing capital requirements in New Zealand and the RBNZ requirement to structurally separate Westpac’s NZ business operations from its operations in Australia, it feels it is now appropriate to assess the best structure for these businesses going forward.
Westpac intends to provide further updates as and when required.