Westpac (ASX:WBC) share price higher despite $282 million profit hit

The Westpac Banking Corp (ASX:WBC) share price is on the move on Monday despite revealing that its half year earnings will be hit by notable items…

| More on:
man looking through window at sky scraper buildings

Image source: Getty Images

In morning trade, the Westpac Banking Corp (ASX: WBC) share price is pushing higher despite the release of a mixed announcement.

At the time of writing, the banking giant’s shares are up almost 1% to $25.31.

This leaves the Westpac share price trading just short of its 52-week high of $25.52.

What did Westpac announce?

Investors have been buying the bank’s shares this morning despite revealing that its half year profits would be hit by notable items.

According to the release, there are a number of notable items that will impact its profit for the period by a total of $282 million after tax. The release explains that these items will impact both its cash earnings and statutory net profit equally.

Among its most notable items are additional provisions for customer refunds, payments, associated costs, and litigation provisions of $220 million.

There is also a $115 million write-down of capitalised software and other intangibles, $56 million for ending its relationship with IOOF Holdings Limited (ASX: IFL), an $84 million write-down of goodwill related to Lenders Mortgage Insurance, and an accounting loss on sale in Westpac Pacific along with transaction costs and payments associated with divestments totalling $113 million.

What else?

As you might have noticed, the notable items listed above add up to far more than $282 million.

That’s because these losses were partly offset by net gains in a couple of its tech investments.

The release explains that Westpac will recognise a net gain on the revaluation of its investment in Coinbase of $288 million and a gain on sale of its holding in Zip Co Ltd (ASX: Z1P) of $18 million.

This could explain why the Westpac share price is pushing higher today despite the above.

Software capitalisation

In addition to the above, the bank has advised of changes in its software capitalisation policy.

Westpac has increased the threshold before a project is capitalised to $20 million (previously $1 million).

This policy has been applied from 1 October 2020 and will see the bank expense a higher portion of its investment spending from now on. However, the higher expense is not treated as a notable item and will have no impact to the carrying value of capitalised software at 30 September 2020.

Following today’s gain, the Westpac share price is now up 29% since the start of the year.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

Woman looks amazed and shocked as she looks at her laptop.
Materials Shares

Here’s why the Calix share price is leaping 6% on Tuesday

The environmental technology company’s shares are on the rise after a joint announcement with Pilbara Minerals.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Share Market News

Why is the Pilbara Minerals share price climbing today?

Investors could be responding well to news out of Pilbara's camp.

Read more »

Technology Shares

Droneshield share price leaps 10% amid strong Ukrainian demand

The company's anti-drone systems are employed by militaries, law enforcement and private enterprises across the world.

Read more »

A kid and his grandad high five after a fun game of basketball.
Share Gainers

3 ASX All Ordinaries shares hitting multi-year highs on Monday

These names are outpacing major benchmarks today.

Read more »

A graphic showing a businessman running up a white upwards rising arrow symbolising the soaring Magellan share price today
Share Gainers

Why Brambles, Core Lithium, Infomedia, and Qube shares are charging higher

These ASX shares have started the week strongly...

Read more »

A man sits on a couch with his arms out feeling exasperated while looking at the Costa share price going down on his laptop today
Share Gainers

Why is the ASX 200 giving back the morning’s gains on Monday?

Aussie shares are showing mixed results on Monday.

Read more »

Person pointing at an increasing blue graph which represents a rising share price.
Share Gainers

Why is the Nitro Software share price rallying 5%?

Tech shares are showing signs of life again on Monday.

Read more »

A graphic showing a businessman running up a white upwards rising arrow symbolising the soaring Magellan share price today
Share Gainers

Here’s why the Chrysos share price is rebounding 16%

Investors are staging a comeback for the company.

Read more »