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.
Will we see more customer remediation costs on the way for Westpac after a loss in the Federal Court that saw the bank severely criticised and its actions taken to task by the three judges sitting on the appeal?
Westpac's earnings result fell short of Morgan's forecast, although adjusting for "transient items" produces a better underlying result. The dividend of 80c, down from a 94c interim, is -4c lower than the broker forecast.
Westpac has announced additional charges for customer remediation and wealth management restructuring. Additional charges reduce Morgan Stanley's cash profit estimates by -6.5% for the second half and -3.5% overall for FY19.
The bank has announced that first half cash earnings will be reduced by around -$260m amid further customer remediation. This remediation does not include aligned dealer group fee-for-no-service, which is still to come.
Morgan Stanley observes conduct-related provisions are weighing on the earnings outlook and reinforcing the view that a reduction in profitability may be required in the next few years to win back support from major stakeholders.