Westpac Banking Corp (ASX: WBC) is facing a class action by Slater & Gordon Limited (ASX: SGH) relating to a cash investment option.
Westpac Banking Corporation, more commonly known as Westpac, is one of Australia’s ‘Big Four’ banks and a financial-services provider headquartered in Sydney. It is one of Australia’s largest lenders to homeowners, investors, individuals (via credit cards and personal loans) and business. Its name is a portmanteau of “Western” and “Pacific”.
Westpac Faces A Class Action
As if the Royal Commission woes weren’t enough, the major bank is now facing a class action filed by Slater & Gordon on behalf of Ms Tracy Ghee.
The target of the class action are Westpac subsidiaries BT Funds Management Limited (BTFM) and Westpac Life Insurance Services Limited (WLIS) in relation to BTFM’s BT Super for Life cash investment option.
According to reporting in the Australian Financial Review, one of Slater & Gordon’s main points is that the bank was paying an interest rate of 1.3% when cash was paying up to 2.5%. The lawyers’ point is that BT had chosen to go for a lower interest rate for the benefit of Westpac rather than helping members.
The class action claims that the bank wilfully shut its eyes and it would have achieved higher net returns.
But Westpac is understood by the AFR to say that it was a commercial return and that customers were charged a premium for safety.
In an ASX release Westpac stated that the damages sought by the claim are unspecified. Although it’s believed it will run into millions, perhaps tens of millions.
This class action certainly wouldn’t bring the bank down, but it could be painful enough to materially bring down profit down a little. Any reduction of profit is a cut from potential future dividend payments too.
Westpac has a fully franked dividend yield of 6.5%. This is pretty good compared to the market, but I’d prefer to buy shares of the reliable businesses in the free report below.
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