Westpac share price on watch following $1.3b earnings hit

Notable items will leave a sizeable dint in the bank's second-half earnings.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • The Westpac share price could be in for a big day on Tuesday. It closed Monday's session at $23.87
  • The bank revealed $1.3 billion of post-tax impacts from notable items to be included in its upcoming half-year earnings after Monday's close
  • Much of that was due to the $1.1 billion loss from the sale of the bank's life insurance business to be recognised next month

The Westpac Banking Corp (ASX: WBC) share price will be in focus on Tuesday after the bank revealed a $1.3 billion hit to its half-year earnings.

The hit – born from notable items, including a loss on the sale of Westpac Life Insurance – will dint the S&P/ASX 200 Index (ASX: XJO) bank's second-half net profit and cash earnings.

Westpac revealed the upcoming impact after the market closed on Monday. The bank's stock ended Monday's trade at $23.87.

Let's take a closer look at the news that might drive the Westpac share price on Tuesday.

A corporate executive in a suit and wearing boxing gloves slumps in the corner of the ring representing the battered Zip share price and consideration reportedly being given to dumping the company's UK operations

Image source: Getty Images

Westpac share price in focus on $1.3b impact

The Westpac share price could be one to watch after the bank announced its second-half results will include a significant dint.

Much of the $1.3 billion post-tax hit from notable items relates to the sale of its life insurance business.

The bank completed the sale of the business to a Dai-ichi Life Group subsidiary for $900 million in August.

That saw Westpac recognise a $1.37 billion loss, $270 million of which impacted its financial year 2021 earnings. The other $1.1 billion will be recognised in its results for the second half of financial year 2022.

Other notable items resulted from:

  • The sale of Advance Asset Management and successor funds transfer of BT's personal and corporate superannuation funds
  • The sale of the bank's motor vehicle and its vendor finance businesses
  • Shrinking the bank's corporate and branch footprint
  • Higher provisions for customer refunds, associated costs, and litigation costs

Most of the notable items were previously disclosed to the market as divestments were announced.

They left a positive 12 basis points impact on the bank's common equity tier 1 capital ratio. The completion of the life insurance sale added 17 basis points, while the other notable items had a 5 basis point impact.

The $83 billion banking giant will release its full-year results on 7 November.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

Red sell button on an Apple keyboard.
Broker Notes

Sell alert! Why this expert is calling time on Westpac shares

A top analyst forecasts growing headwinds for Westpac shares. But why?

Read more »

Man and woman looking surprised and shocked.
Bank Shares

Should I sell my CBA shares before the end of June?

Do you own the banking giant's shares? Read this.

Read more »

Nervous customer in discussions at a bank.
Bank Shares

Down 17%: What should I do with my Westpac shares now?

Westpac shares hit an all-time high in early April.

Read more »

A group of five people dressed in black business suits scrabble in a flurry of banknotes that are whirling around them, some in the air, others on the ground as some of them bend to pick up the money.
Bank Shares

Here's the dividend forecast out to 2027 for NAB shares

How much dividend income can investors bank on in the next couple of years?

Read more »

A man with a wide, eager smile on his face holds up three fingers.
Bank Shares

3 big reasons to buy CBA shares

The banking backdrop is tougher, yet the strongest franchises can still have a role in a long-term portfolio.

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, and holding a mobile phone in his other hand.
Bank Shares

Is the NAB share price good value after crashing 24%?

Let's see if now is a good time to buy this banking giant's shares.

Read more »

two young boys dressed in business suits and wearing spectacles look at each other in rapture with wide open mouths and holding large fans of banknotes with other banknotes, coins and a piggybank on the table in front of them and a bag of cash at the side.
Bank Shares

How many ANZ shares do I need to buy for $10,000 of passive income?

Can ANZ deliver investors significant dividend income?

Read more »

Man holding different Australian dollar notes.
Dividend Investing

Invested in ASX 200 bank shares for dividends? This fundie prefers other stocks

James Gerrish explains which ASX stocks look better than banks for passive dividend income.

Read more »