Westpac (ASX:WBC) share price dips following vehicle finance sale

The banking giant just offloaded its auto finance business.

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The Westpac Banking Corp (ASX:WBC) share price started this morning’s session in the red. This comes after the bank announced it will sell its vehicle dealer finance and novated leasing businesses to Angle Finance, a portfolio company of US private equity firm Cerberus Capital Management.

Westpac shares are currently down 0.66% to $25.73 at the time of writing.

Westpac offloads $1 billion loan book

As apart of the transaction, Westpac have agreed to transfer auto dealer and introducer agreements together with wholesale dealer loans of approximately $1 billion, strategic alliance agreements with vehicle manufacturers, and novated lease origination capability and related agreements.

Westpac will also retain its existing retail auto loans of around $10 billion originated by the businesses being transferred.

The sale is still subject to the final value of the portfolio transferred, however Westpac believes it will generate accounting gain on completion. The divestiture also is expected to add around 6 basis points to the company’s common equity tier 1 (CET-1) capital ratio. As of 31 March 2021, Westpac had a CET-1 capital ratio of 12.34%.

Westpac chief executive Jason Yetton commented::

This sale brings certainty for our customers, new opportunities for our people and continues the progress we are making on becoming a simpler bank.

Angle Auto Finance is committed to the Auto Finance industry and will provide the capability and strategic focus to grow and improve the business.

The announcement reports that final completion of the sale is expected for the end of the calendar year.

About the Westpac share price

Westpac shares come into Monday’s session after finishing last week 2.67% in the red. Over the previous month, the Westpac share price has fallen 2.8% at the time of writing, and over the year-to-date the company’s share price has gained around 31%.

On current prices, Westpac has a market capitalisation of around $94 billion and the company’s stock has a price-to-earnings ratio (P/E) of around 22.

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