Westpac's hybrid is good value (yes!)

Christopher Joye

Coolabah Capital

In The AFR my main column argues that---shock, horror---the new Westpac hybrid, called Westpac Capital Notes 4 (ASX: WBCPG), is actually a good deal. That's a first for me. I explain that while CBA's Perls 8 has performed very well in the secondary market it has been the dud I previously described it as compared with the other major bank hybrids available at the time with far better margins and shorter maturities (these securities have subsequently delivered much stronger capital gains). On the subject of banks, I note that the RBA's recently published research that finds that the major banks and Macquarie profit from government subsidies of their funding costs worth $1.9bn to $3.7bn annually (notably even more than my recent $1.4bn plus pa estimate)---which arise as a result of their credit ratings being artificially lifted two notches by rating agencies on the assumption that only these banks (and their senior bonds) will be bailed-out in a crisis---will amplify pressure on APRA to clarify that their senior debts are, in fact, "loss-absorbing". The RBA recommends exactly this... Free (VIEW LINK)


Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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