Citi believes Westpac Banking Corp’s decision to retain the New Zealand business Westpac NZ Ltd most likely reflects the complexities of divesting from a liquidity and capital perspective.
The broker suspects Westpac was likely ultimately faced with the decision of pre-funding the capital build prior to demerger, or demerging below book value, neither of which would be palatable.
Cit views today’s decision as being indicative of the judgment call faced by peers, and consequently thinks the issue of divesting NZ subsidiaries has now been put to bed.
Buy rating and target price of $29.50 are both retained.
Target price is $29.50.Current Price is $25.83. Difference: $3.67 – (brackets indicate current price is over target). If WBC meets the Citi target it will return approximately 12% (excluding dividends, fees and charges – negative figures indicate an expected loss).