The Westpac Banking Corp (ASX: WBC) share price is having an August to make investors smile.
At close of trade on Friday, shares in the Australian big four bank were trading for $25.76 – down 0.23%. For context, the S&P/ASX 200 Index (ASX: XJO) ended 0.03% lower.
Since the beginning of the month however, Westpac shares have risen 4.93% while the benchmark index is 0.85% higher.
This green August comes after a so-so July. The Westpac share price fell 5% the prior month despite a rising overall market.
Let's see what's been affecting Westpac this month.
The month so far for Westpac
Shockwaves from the biggest M&A in Australian history, the $39 billion acquisition of Afterpay Ltd (ASX: APT) by Square Inc (NYSE: SQ), may have extended to the Westpac share price.
As Motley Fool previously reported in October last year, Australia's oldest bank revealed a partnership with Afterpay which would see Westpac provide its banking-as-a-service platform to the buy now, pay later contender.
The offering was expected to be symbiotic – Afterpay gets white-labelled bank accounts and Westpac extracts revenue from the payments shift. However, that was before US-based payments giant Square entered the scene.
Now Westpac has been unnerved by Afterpay shacking up with the competition. Square commands a larger market capitalisation than the Aussie bank, at US$121 billion. The company is making a conscious move to disrupt traditional banks with its business deposits and loans.
Westpac also announced the sale of its life insurance business to Dai-ichi Life Group subsidiary, TAL.
TAL will pay $900 million for the business. It will also enter a strategic alliance to provide Westpac's Australian customers with the service for another 20 years.
According to Westpac, the divestment "releases significant capital".
Westpac has lost a total of $1.3 billion (post-tax) on the sale. However, it will add around 12 basis points to Westpac's Level 2 common equity Tier 1 (CET1) capital ratio.
The big bank will record a post-tax loss of $300 million for the life insurance business in its financial year 2021 results. The immediate loss mainly relates to transaction and separation costs.
Westpac share price falls on third quarter update
The Westpac share price slid after the release of its third-quarter update in August.
The bank revealed a CET1 ratio of 12% on a reported basis and 12.5% on a pro forma basis. As a result, the Westpac Board indicated it will consider a further return of capital to shareholders. An update on this will be made with its FY 2021 results later this year.
As well, Westpac gave an unfavourable forecast with its update. The bank once again reiterated that it was facing net interest margin (NIM) headwinds and therefore expected its second-half NIM to be lower than what was achieved in the first half. It also reaffirmed its expectation for its expenses to be higher year-on-year in FY 2021.
Westpac share price snapshot
Over the past 12 months, the Westpac share price has increased by 49.3%. It has outperformed the benchmark ASX 200 by about 27 percentage points. Year-to-date it has risen 31.0% to the ASX 200's 11.6% lift.
Westpac has a market capitalisation of $94.7 billion.
