Westpac’s Capital Notes 7 Distribution Hinges on Payment Conditions

Westpac’s Latest Distribution Announcement

Westpac Banking Corporation has declared an ordinary distribution of AUD 1.2463 per Westpac Capital Note 7 (WCN 7) for the quarter ending 22 September 2025. This payment is fully franked, meaning investors will receive a tax credit reflecting the 30% corporate tax rate paid by Westpac. The distribution is scheduled for payment on 22 September 2025, with the ex-dividend date set for 11 September and the record date on 12 September.

Understanding the Distribution Rate

The annualised distribution rate for this period is 4.9447%, calculated in accordance with the terms of the WCN 7. This rate is derived from the 3-month Bank Bill Swap Rate (BBSW) observed on 23 June 2025, which stood at 3.6639%, plus a fixed margin of 3.40%. The combined rate is then adjusted for corporate tax to arrive at the final distribution rate. This method ensures the distribution reflects prevailing short-term interest rates while providing a stable margin to investors.

Capital Notes and Investor Implications

Westpac Capital Notes 7 are perpetual, non-cumulative capital instruments designed to provide investors with regular income streams linked to market interest rates. The fully franked nature of the distribution enhances the effective yield for Australian investors by allowing them to claim franking credits against their tax liabilities. However, the payment remains subject to Westpac’s discretion and the satisfaction of certain conditions, which is standard for such hybrid securities.

Context Within Westpac’s Capital Management

This distribution announcement aligns with Westpac’s ongoing capital management strategy, balancing investor returns with regulatory capital requirements. By linking the distribution rate to the BBSW plus a fixed margin, Westpac maintains flexibility in its cost of capital while offering investors a competitive yield. Market watchers will be keen to observe how future interest rate movements and Westpac’s financial performance influence subsequent distributions.