Westpac shares sink after court calls conduct ‘grossly negligent’

Westpac Banking Corporation (ASX: WBC) shares are sliding on Wednesday as investors weigh up another regulatory headache for the ‘big four’ bank.

At the time of writing, the Westpac share price is down 1.78% to $35.96.

It continues a softer start to the year for the banking giant. Westpac shares are now down around 7% in 2026, despite still sitting about 13% higher over the past 12 months.

The selling follows court findings over how the bank handled some customers seeking financial hardship support.

Here’s what happened.

Westpac in trouble?

According to ASIC, Westpac failed to respond to more than 200 online hardship requests within the time required by law.

Those failures occurred over nearly 6 years, from 2017 to 2023.

The requests came from customers of Westpac and its subsidiaries, St George Bank, BankSA, and Bank of Melbourne.

These customers had told the bank they were experiencing financial hardship and were struggling to meet repayments on products including home loans, credit cards, personal loans, and car loans.

ASIC said some customers were seeking help after events such as domestic abuse, natural disasters, serious illness, or job loss.

Federal Court Justice Timothy McEvoy found Westpac had not acted deliberately. However, he said the bank’s conduct was “grossly negligent” and ordered the penalty.

Why investors are selling

Westpac has been ordered to pay a $26 million penalty, but the amount itself isn’t large compared with the bank’s earnings base.

Earlier this month, the bank reported first-half statutory net profit of $3.4 billion, up 3% on the prior corresponding period.

It also declared an interim dividend of 77 cents per share, fully franked, payable on 26 June 2026.

Nonetheless, the banks are already dealing with a more difficult backdrop. Investors are watching mortgage competition, funding costs, arrears, household budgets, and possible changes to housing policy.

A court ruling tied to hardship customers adds another uncomfortable headline at a time when the sector is already getting plenty of attention.

The bigger picture

Westpac said it had apologised to affected customers and was “deeply sorry” it let them down.

The bank said it has also completed a remediation program, including fee refunds, debt waivers, and compensation.

It said it has strengthened processes and upgraded its online hardship systems.

The question for investors is whether this is now largely behind the bank, or whether it keeps Westpac in the regulatory spotlight for longer.

Westpac still has plenty behind it, including a large mortgage book, a major retail deposit base, and a fully franked dividend.

But after a 7% fall this year, today’s court findings appear to have given investors another reason to stay cautious.

The post Westpac shares sink after court calls conduct ‘grossly negligent’ appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.