Westpac’s Discretionary Distribution Raises Questions on Future Payments

Westpac's Latest Distribution Announcement

Westpac Banking Corporation has confirmed a fully franked ordinary distribution of AUD 1.2140 per Westpac Capital Notes 9 (WCN 9) for the quarter spanning 23 September to 22 December 2025. This announcement, made on 25 September 2025, sets the distribution rate at an annualised 4.8692%, calculated using the 3-month Bank Bill Swap Rate (BBSW) plus a fixed margin of 3.40%, adjusted for the prevailing corporate tax rate.

Calculation and Payment Details

The distribution rate reflects the sum of the 3-month BBSW rate of 3.5560% and the margin of 3.40%, which totals 6.9560% before tax adjustments. Applying the 30% corporate tax rate reduces this to the effective 4.8692% annual rate used for the distribution calculation. The payment amount of AUD 1.2140 per note is fully franked, meaning investors receive a tax credit reflecting the corporate tax already paid by Westpac.

The ex-date for the distribution is 11 December 2025, with the record date on 12 December 2025, and the payment scheduled for 22 December 2025. Importantly, no external approvals such as security holder or regulatory consents are required for this distribution, underscoring Westpac's confidence in meeting its capital obligations.

Context Within Westpac's Capital Strategy

Westpac Capital Notes 9 are perpetual, non-cumulative capital instruments designed to bolster the bank's regulatory capital base. The distribution payment is subject to Westpac's absolute discretion and certain payment conditions, a standard feature that provides flexibility in managing capital distributions in varying market conditions.

This announcement aligns with Westpac's ongoing capital management strategy, balancing investor returns with regulatory requirements and financial prudence. The fully franked nature of the distribution is particularly attractive to Australian investors seeking tax-efficient income streams.

Investor Implications and Outlook

For investors, the declared distribution offers a predictable income stream with a competitive yield linked to prevailing market rates. However, the discretionary nature of the payment means investors should remain attentive to future announcements, especially in the context of broader economic or regulatory shifts that could impact Westpac's capital management decisions.