Westpac Banking Corp Sells Insurance Business to Allianz (ASX:WBC)

At the time of writing, the Westpac share price is trading at $20.32, up 0.20%.

Westpac Banking Corp [ASX:WBC] announced they have sold their insurance business to Allianz.

ASX WBC Share Price Chart

Source: Optuma

News about the sale

Over the last few years there was a mass exodus of the banks from the insurance space.

In 2017, Nippon Life took up 80% of National Australia Bank Ltd’s [ASX:NAB] life insurance business.

Macquarie Group Ltd [ASX:MQG] offloaded their insurance business to Zurich.

The Commonwealth Bank [ASX:CBA] sold CommInsure to the AIA group.

Now Westpac are following suit and selling up. The company recently announced the sale of their general insurance business to Allianz for the price of $725 million.

They have also entered an exclusive 20-year agreement for the distribution of general insurance products to Westpac’s customers.

It’s a bit of a bright spot in an otherwise grim year for Westpac and most other banks.

With the COVID-19 pandemic hitting Australia hard, the reserve bank slashed interest rates to a historic low of 0.1%

For someone with a $400,000 mortgage, the current interest rate of 0.1% represents an approximate saving of $1000 a year, although that is highly dependent on the rate agreed to with the lender.

With a drop in the number of credit cards on the market as consumers turn to buy now, pay later options and lower interest rates, there may be increased pressure on earnings for the bank.

Westpac and the future

Westpac Share Price Chart

Source: Optuma

The share price fell off a cliff in February during the COVID outbreak, falling to a low of $13.47 before making its way back up.

The recovery is far from great, as it was announced in September that Westpac had been fined $1.3 billion for 23 million breaches of anti-money laundering laws.

All up, this left the bank paying a $0.31 fully franked dividend.

In the chart above, the WBC share price is sitting below the resistance level of $21.13 at the time of writing. Should it break through, then $23.40 may provide future resistance.

On the downside, if the price falls then the level of $19.79 may be enough to halt the fall.

Westpac is one of Australia’s Big Four, but this year hasn’t been a fruitful one. At this stage I would be looking at this as a stock to trade and while still paying a dividend, there may be better options out there paying more.

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Regards,

Carl Wittkopp
For Rum Rebellion


Carl Wittkopp writes for The Rum Rebellion and has a diploma in Financial Planning. He specialises in the technical analysis of stocks.


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