The Westpac Banking Corp (ASX: WBC) share price is edging higher today after providing an update on its $3.5 billion share buyback.
At the time of writing, the banking giant's shares are up slightly to $21.05.
What's happening?
When Westpac announced its full year results last month, the bank reported an off-market buyback of up to $3.5 billion of shares.
Since that announcement, the Westpac share price has lost over 18% of its value amid concerns over increasing competition and softer than expected margins.
The Westpac Board has noticed this and today highlighted some positive and negative implications for the buyback.
It commented: "Following the recent fall in Westpac's share price, the rationale for the Buy-Back is even more compelling. Specifically, the lower share price may provide Westpac with the opportunity to buy back more shares than was originally contemplated. However, the lower current share price level also has implications for Buy-Back participants. As a function of the current share price, the sale proceeds and franking credits that are distributed to Buy-Back participants are potentially reduced."
What now?
In response to the weaker Westpac share price, the bank has decided to amend some of the terms of the buyback.
This includes the discount range of the buyback. This has been changed to a more generous 0% to 10% discount from 8% to 14% previously. Management notes this will improve the potential return of the buyback for shareholders.
Another amendment is the closing date of the tender period. This has been pushed back to 11 February from 17 December to allow shareholders additional time to assess the revised buyback terms.
Everything else stays the same. The capital component will be $11.34 per share, subject to ATO approval, and the dividend component will be the buyback price less the capital component. The final buyback price will be based on the five-day volume weighted average price at the closing date.
Whatever happens, though, Westpac remains committed to buying back up to $3.5 billion worth of shares. This will see the bank buy back shares on-market to make up the difference if the final buyback demand is less than $3.5 billion.
Westpac's CFO, Michael Rowland, commented: "The lower share price may provide us with the opportunity to buy back and cancel more shares than we originally expected. Accordingly, we are committed to completing our capital management program. The changes to the Buy-Back announced today are designed to ensure that participants are not disadvantaged by recent market movements and increase the likelihood of us buying back $3.5 billion of shares. If Buy-Back demand is less than planned, we intend to commence an on-market buy-back for any shortfall."
