Investor appetite for Westpac shares put to test by crisis

Westpac’s ability to raise $500 million from smaller investors will be a indication of the strength of retail demand for the stock, which is popular for its dividends, but has fallen sharply since the bank was accused of the breaches by AUSTRAC, the financial crimes regulator.

Investors Mutual investment director Anton Tagliaferro said he thought the bank would struggle to hit its target.”I would be very surprised if the retail [share issue] still gets wholly taken up given the adverse publicity that Westpac has had over the last week or two,” he said.

Even so, Mr Tagliaferro said that if this occurred, it would not be “the biggest of their concerns”  compared with the bank’s other problems, such as finding a long-term chief executive and chairman.

Banking analyst at Shaw & Partners, Brett Le Mesurier, said in normal circumstances Westpac would easily raise the $500 million it was targeting. He said this was not a large amount relative to the size of the bank.

“It does not seem large in the scheme of things, but I cannot think of a time when a bank has had worse press, and that’s never helpful,” he said.

Under the raising, Westpac is allowing “mum and dad” investors to apply for up to $30,000 in newly-issued stock at a significantly lower price than the $25.32 a share than institutions paid in early November.

Retail investors will be offered the stock at a 2 per cent discount to the volume weighted average price over the five trading days until Monday this week. Westpac’s website on Sunday said the indicative price was $24.25, based on the first three of these five days.

The retail raising, which opened on November 12, is not being underwritten by an investment bank, and Westpac is allowing small investors to withdraw orders placed before the scandal broke as class action law frms curcle.

The crisis at Westpac is also likely to feature prominently when APRA’s chairman, Mr Byres, appears before the House of Representatives economics committee in Canberra on Monday.

Committee chair, Liberal MP, Tim Wilson said: “Westpac’s issues follow from systems failure and it puts a spotlight onto APRA and AUSTRAC about whether they’re applying sufficient scrutiny on executives that they will drive change through their institutions and shine lights in dark place.”

Deputy committee chair, Labor’s Andrew Leigh, said he wanted to know when the regulator first found out about the scandal at the bank, and he would seek more information about APRA’s probe into Westpac. “I’m keen to know what it is APRA is looking into,” he said.

With Westpac’s leadership now uncertain, it was reported over the weekend that former chief executive David Morgan would not accept the role of next chairman, despite an earlier report suggesting he had thrown his hat in the ring.

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