Westpac shares fall after sell rating

WESTPAC shares fell sharply after investment bank UBS downgraded its recommendation on the bank to “sell” after documents released by the banking royal commission raised concerns over the quality of the lender’s mortgage book.

Westpac shares closed at $1.05, or 3.6 per cent lower, at $28.13 yesterday.

The other big three banks Commonwealth Bank, National Australia Bank and ANZ also lost ground.

In a research report, UBS analyst Jonathan Mott referred to documents recently released by the banking royal commission which included a review in May, 2017, of the big four banks’ mortgage agreements by banking regulator APRA. APRA chairman Wayne Byres assessed that none of the banks had particularly strong results from the targeted review, but Westpac was “a significant outlier”.

The royal commission also released data on 420 Westpac mortgages that were analysed by financial advisory firm PwC.

PwC found that eight out of 10 of Westpac’s mortgage “control objectives” were ineffective. Mr Mott said a UBS analysis of the data considered by PwC suggested that minimum income checks were not completed in 29 per cent of cases, and in 30 per cent of cases, the borrower’s financial position may have been misrepresented.

In nine per cent of cases the loan would have been blocked if the application had been based on true information.