Westpac Banking Corp (ASX: WBC) continues to work on improving its balance sheet after announcing another asset sale. The Westpac share price is currently down by 0.35%
Westpac asset sale
After the recent announcement of another asset sale, Westpac announced that it has agreed to sell its Vendor Finance business to Angle Finance, a company owned by Cerberus Capital Management.
As a bit of background, Vendor Finance supports third parties to fund small ticket equipment finance loans to around 42,000 Australian businesses. The transaction is expected to result in the transfer of around $500 million of customer loans.
Westpac management said that this sale represents the first transaction of the bank’s plan to simplify the business and brings certainty to Vendor Finance customers.
It’s a pretty small part of the Westpac, so the sale is expected to have negligible impact on Westpac’s balance sheet and capital ratios. The bank is expecting a small accounting loss on the sale with an initial payment on completion and deferred considerations payable over the two years afterwards. The transaction is expected to complete at the end of April 2021.
Summary
This seems like an interesting sale because it heralds more asset sales by Westpac. Individually this deal doesn’t amount to much, but several of them together could have a meaningful impact on increasing Westpac’s balance sheet strength, which is welcome during this difficult period. So keep a lookout on Rask Media for more articles in the future about asset sales by Westpac.
However, even with a stronger balance sheet I don’t think Westpac is a buy. For a financial business I’d rather buy Macquarie Group Ltd (ASX: MQG) and for defensive dividends I would rather invest in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares.