Via the excellent Jonathon Mott at UBS:
We have cut FY19E EPS by 3% given exit costs and larger losses from the Advice business, but we upgraded FY20E by 0.6% (exit from loss-making business). However, our forecasts are yet to incorporate further customer remediation charges (fee-for-no-service) for aligned advisers which are very difficult to estimate. That said, we view the pressure on WBC’s Wealth businesses as somewhat of a warm-up, with the main event being the rapid deterioration in the housing market (68% of WBC’s loan book). With an ongoing tightening of credit as banks move to a stricter interpretation of Responsible Lending (reducing HEM reliance); ongoing switching from Interest Only to P&I; Debt-to-Income caps under Comprehensive Credit Reporting; and potential changes to negative gearing should the ALP win the upcoming Federal election, the economy is weakening sharply and the risk of a Credit Crunch is continuing to rise. Potential changes to NZ capital requirements throw another spanner in the works.