Two years after reducing its stake in BT Investment Management (BTIM), Westpac has sold another 19% of the company to a number of institutions at $10.75 per share. Westpac plans to sell its remaining 10% stake in due course but not before May 2018 at the earliest.
While BTIM will remain a strategic provider of asset management services to Westpac, with Westpac's BT Financial Group division focusing on wealth solutions, the bank believes it no longer needs to hold a stake in BTIM.
However, as APRA doesn't allow Australian banks to include equity investments when calculating their capital for regulatory purposes, the uncertainty over whether APRA will require the banks to hold more capital (see Westpac: Interim result 2017) likely also played a part in the decision. The sale will increase Westpac's common equity tier one capital ratio by 0.10%. HOLD.
As for BTIM, a PER of 22 – which values the firm at around 3.9% of its $84bn in funds under management – means we don't see value at current prices. We'll keep an eye on it but we don't intend to commence coverage at this stage.
*Please note our recommended maximum portfolio weightings of 10% for Westpac individually and 20% for the banking sector as a whole. More conservative investors and those with other exposure to the property market should use lower limits.