WBC – Morgan Stanley rates the stock as Equal-weight

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AUSTRAC has launched a civil action against Westpac for systemic non-compliance with anti-money laundering and counter-terrorism financing laws. Morgan Stanley notes investors are aware of the issue but the new allegations could create an overhang for the stock.

The broker points out there is a wide range of outcomes, every $500m equates to around 11 basis points of CET1 capital, and forecasts a $250m penalty in FY20. AUSTRAC has noted Westpac disclosed issues with its reporting and has co-operated, lifting controls.

Equal-weight rating maintained. Target is $25.50. Industry view: In Line.

Sector: Banks.

Target price is $25.50.Current Price is $25.67. Difference: ($0.17) – (brackets indicate current price is over target). If WBC meets the Morgan Stanley target it will return approximately -1% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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