Westpac shares touched 10-month lows yesterday in the wake of legal action launched against it from AUSTRAC, the financial intelligence agency as the role of CEO, Brian Hartzer moved further into the frame.
And analysts said that if the role of Mr. Hartzer and his future in the position comes under pressure, so to should the future of long-time board member and chair, Lindsay Maxstead.
Westpac shares fell another 1.9% yesterday to close at $25.16 taking the losses for the past two days to more than 5% and over 12% in the past month.
The shares touched a 10 month low of $24.80 during trading. That meant the shares fell under the $25.32 issue price in the recent $2 billion capital raising.
Westpac’s $500 million retail funding raising is now underway and closes on December 1. A price-earnings ratio of more than 7% (at the issue price of $25.32) will prove to be very attractive to retail investors.
It will prove to be a litmus test to see if small investors want to punish Westpac in any way.
Prime Minister Morrison bought into the story, saying that the Westpac board should reflect “very deeply” on the future of CEO Brian Hartzer.
“These are things that the board and the management need to determine themselves,” Mr. Morrison told the ABC’s AM program.
Fairfax Media papers reported funds managers were supporting Hartzer.
Senior analyst at Clime Asset Management, David Walker, told Fairfax he thought it was unlikely the CEO would go over this scandal.
“I don’t think this scandal will result in the CEO leaving,” he said.
And Atlas Funds Management chief investment officer Hugh Dive said Mr. Hartzer had done well leading the bank overall.
“It’s taken $6 billion off the market capitalisation in two days, so it’s pretty significant. I would like to say he keeps his job because I think he has done it quite well,” Mr. Dive told Fairfax.
And according to analysts at Bell Potter Westpac remains a ‘hold’.
“WBC is currently reviewing AUSTRAC’s statement of claim and will respond in due course. Pending this response, our cash earnings estimates are unchanged,” Bell Potter analyst TS Lim told clients.
But he cut his forecast for Westpac’s full-year dividend to 150 cents per share, leading him to downgrade his 12-month price target for the stock from $29.50 to $27.00.
“These are serious allegations that would likely dog the bank’s brand value for some time to come,” he said. “At this point, we conservatively estimate WBC’s potential liability at up to $3.7 billion.”
Mr. Lim said this implies the need for further capital raising “whichever way you look at it”.