NAB shares slid yesterday in the wake of Westpac’s surprise $2.5 billion capital raising and dividend cut as investors said the Melbourne-based lender would be the next major to cut its payout or even approach shareholders for more money.
After the ANZ cut the level of franking on its dividend to 70% last week, analysts had been forecasting Westpac to do something of the same order. Instead, it trimmed its dividend to 80 cents a share and kept the franking at 100% (which ANZ should have done) but surprised with the $2.5 billion capital raising.
It will be NAB’s last full-year profit report before new chief executive Ross McEwan takes over. It reports on Thursday.
The shares were down more than 3.2% at one stage before they rose late in the session to leave the loss at 2.5% and the close at $27.69.
ANZ shares lost ground – off another 0.9% to 425.95, Commonwealth shares fell 1.5% to $77.05. It is due to release its first-quarter trading update shortly.
Westpac shares closed at $27.88 last Friday ahead of the trading halt sought yesterday to allow the first part of the raising – a $2 billion issuer to the big end of the market – to go ahead.
Another $500 million will be sought from retail shareholders via a share purchase plan.
The placement will be undertaken at a fixed price of $25.32, a 6.5% discount on that last closing price.The bank’s annual report, also released on Monday, showed CEO Brian Hartzer received no short-term bonus for the year.
The report said Mr. Hartzer had recommended to the board that he forego the payment due to accountability for poor “non-financial risk and financial outcomes,” alongside poor customer outcomes revealed at the royal commission.
He would have been eligible for a short-term bonus of $1.6 million, or 40 percent of the maximum amount, the report said, but the board considered a bonus of zero was “appropriate.”
Still, Mr. Hartzer’s realised pay for the year was a comfortable $4 million, made up of $2.7 million in fixed pay, and $1.3 million in shares from bonuses in previous years.
Westpac said its net profit dropped by 16% to $6.78 billion Australian dollars in the year to September, the first fall in four years after rising to $8.1 billion last year.
The result was hit by a sharp rise in provisions for customer refunds, lawsuits and other costs as well as charges for restructuring its wealth businesses that together reduced profit by more than $1.1 billion.
Cash earnings, a measure favoured by Australian banks that tries to reflect profit generated by ongoing businesses and strips out items such as the impact of Treasury shares (shares bought back and not canceled), fell 15% to $6.85 billion.