Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

CBA Announces a BIG Off-Market Buyback - Timing and Past Cases

Aussie Bank Buyback Season Starts - Expect A$12-15bn and Funky Flows

Quiddity Advisors

Event-Driven

As discussed in <a href="https://www.smartkarma.com/insights/aussie-bank-buyback-season-starts-expect-a-12-15bn-and-funky-flows" target="_blank" data-smartkarma-citation="insights:55301" rel="noopener">Aussie Bank Buyback Season Starts - Expect A$12-15bn and Funky Flows</a> exact;y three months ago, and <a href="https://www.smartkarma.com/insights/cba-announces-a-big-off-market-buyback-timing-and-past-cases" target="_blank" data-smartkarma-citation="insights:55903" rel="noopener">CBA Announces a BIG Off-Market Buyback - Timing and Past Cases</a>, I expected <a href="https://www.smartkarma.com/entities/westpac-banking-corp" target="_blank" data-smartkarma-citation="entities:444:1" rel="noopener">Westpac Banking (WBC AU)</a> to announce a A$3.0bn off-market buyback as early as late August but probably in Q3 based on substantial outperformance vs expectations in the covid downturn, and excess capital and franking credits to return. In late August when they reported, Westpac said they had a common equity tier one ratio of 12% and would look to announce shareholder return measures when they reported annual results in November. Today the bank announced full-year results (<a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f0snp1dwwjm.pdf" target="_blank" rel="noopener">announcement</a>, <a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f0vnhjsjxrq.pdf" target="_blank" rel="noopener">slide deck</a>) and <a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f15khpzd1kc.pdf" target="_blank" rel="noopener">announced</a> (<a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f13lszy0r13.pdf" target="_blank" rel="noopener">official notification</a>, <a href="https://www.asx.com.au/asxpdf/20211101/pdf/452f17j0x3j4cn.pdf" target="_blank" rel="noopener">flyer</a>) an Off-Market Buyback of A$3.5bn (and shareholder return of A$5.7bn including dividends) based on a CET ratio of 12.3%, which is well above the APRA's 10.5% level of "unquestionably strong." However, earnings were below expected as NIMs fell 9bp from 2.07% to 1.98% (two-thirds of which was due to competition and one-third due to different mortgage mix) and H2 costs were up as the bank fast-tracked investment to process mortgages faster and with lower cost going forward.  The bank still has higher costs than it wants and though it has shown a roadmap to getting there, it means spending money to do so.The buyback is also probably a little smaller than many had expected. Expectations had increased as CBA had come out larger than the Street expected.Shareholders eligible to participate are those who hold as of 8 November. The buyback will commence on 17 November and will go through 17 December. There is a website for this at <a href="http://www.westpac.com.au/buyback" target="_blank" rel="noopener">www.westpac.com.au/buyback</a>. The price will be at an 8-14% discount (at 1% intervals) to the reference Market Price which is calculated as 5-day VWAP in the last five days of the Offer Period, final day inclusive. This will create a fair bit of interest, and a fair bit of participation. Some holders - most notably foreign holders - will not see the interest and they will simply be able to play the timing, or the impact of EPS accretion, and given the decent ongoing yield and the fact this remains a "restructuring play", there should be interest going forward.

As discussed in Aussie Bank Buyback Season Starts - Expect A$12-15bn and Funky Flows exact;y three months ago, and CBA Announces a BIG Off-Market Buyback - Timing and Past Cases, I expected Westpac Banking (WBC AU) to announce a A$3.0bn off-market buyback as early as late August but probably in Q3 based on substantial outperformance vs expectations in the covid downturn, and excess capital and franking credits to return. In late August when they reported, Westpac said they had a common equity tier one ratio of 12% and would look to announce shareholder return measures when they reported annual results in November. Today the bank announced full-year results (announcement, slide deck) and announced (official notification, flyer) an Off-Market Buyback of A$3.5bn (and shareholder return of A$5.7bn including dividends) based on a CET ratio of 12.3%, which is well above the APRA's 10.5% level of "unquestionably strong." However, earnings were below expected as NIMs fell 9bp from 2.07% to 1.98% (two-thirds of which was due to competition and one-third due to different mortgage mix) and H2 costs were up as the bank fast-tracked investment to process mortgages faster and with lower cost going forward.  The bank still has higher costs than it wants and though it has shown a roadmap to getting there, it means spending money to do so.The buyback is also probably a little smaller than many had expected. Expectations had increased as CBA had come out larger than the Street expected.Shareholders eligible to participate are those who hold as of 8 November. The buyback will commence on 17 November and will go through 17 December. There is a website for this at www.westpac.com.au/buyback. The price will be at an 8-14% discount (at 1% intervals) to the reference Market Price which is calculated as 5-day VWAP in the last five days of the Offer Period, final day inclusive. This will create a fair bit of interest, and a fair bit of participation. Some holders - most notably foreign holders - will not see the interest and they will simply be able to play the timing, or the impact of EPS accretion, and given the decent ongoing yield and the fact this remains a "restructuring play", there should be interest going forward.

Westpac (WBC AU) Announces a BIG Off-Market Buyback