Skip to content
Back to site

Westpac Shares Decline Amid Rising Interest Rates: Unfolding The ASX Banking Scene

 
In the bustling financial scene, ASX-listed Westpac Banking Corp (WBC) shares have seen a downward drift of 1.5% this week, pushing the year-to-date plunge to an underwhelming 13%. This descent is largely attributed to the apprehensive investor sentiment following the Reserve Bank of Australia's decision to raise the cash rate to a staggering 4.1% on Tuesday, a peak not witnessed in over ten years. Further intensifying the trepidation is the discouraging GDP data hinting at a potential recession, which could pose daunting operational hurdles for the Big Four in the near term.


With interest rates soaring, concerns are mounting over the impact on borrowers and a possible surge in bad debts. Chris de Bruin, Westpac's Chief Executive Consumer and Business Banking, conceded that rising interest rates are stretching household budgets thin. He pointed out that although most customers are coping, every rate adjustment is becoming increasingly taxing. Westpac is proactively reaching out to customers who may need extra support and providing competitive rates for those transitioning from fixed loans.


Westpac's CEO, Peter King, shared that there has been a notable increase in home loan distress calls as the rates climb. According to the Australian Financial Review, King indicated to the Australian Banking Association that there's been a surge in "chats" on the hardship hotline. Early 30-day delinquency rates have begun to rise in the six months leading up to March 31, but not all of these are developing into 90-day delinquencies. More customers are reaching out to discuss their situations, although these interactions haven't yet translated into actual hardship arrangements.


However, as many economists forecast the cash rate to reach nearly 5%, it remains uncertain how long this trend will persist. These times are indeed intriguing for ASX banking shares, as they grapple with the challenges presented by escalating interest rates and looming recession fears.


In related news, top-tier broker ANZ shares are presently yielding a generous 7% dividend, while Commonwealth Bank of Australia (CBA) shares are gaining consideration for purchase as they slide below $100. National Australia Bank (NAB) continues its robust performance in business banking earnings, but Bank of Queensland shares experienced a significant fall in May.


As interest rates keep climbing, the future of the banking industry hangs in the balance. Both investors and customers will be closely observing how banks manoeuvre through these trying times and what it implies for their financial security.

Source: https://www.fool.com.au/2023/06/09/why-westpac-is-making-news-this-week/