Westpac Banking Corp reached an agreement to settle the civil proceedings against it with the Australian Transaction Reports and Analysis Centre (AUSTRAC). This includes a penalty of -$1.3bn and brings to an end a disappointing chapter for the bank, observes UBS.
On the bright side, the settlement is lower than the broker feared (-$1.5bn). With $900m already provided for in the first-half result, UBS notes Westpac will be providing for a further $404m in the second half.
UBS believes Westpac’s balance Sheet is well provisioned but it is the capital position which remains an overhang. Moreover, the bank needs substantial investment in technology and integration to achieve the necessary efficiency gains to help offset its weak revenue outlook, suggests the broker.
Buy and $20.50 target retained.
WBC Price at posting:
$17.45 Sentiment: Buy Disclosure: Held
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