COMPANY NEWS & UPDATES
After skipping the interim dividend , we expected the bank to pay out 50 % of second half earnings . Instead , the bank considered earnings for the full year and paid out the maximum allowed under APRA guidance . The dividend reinvestment plan , or DRP , on the final dividend will be fully underwritten , and likely raise around $ 1.1 billion . A 1.5 % discount will apply to the average share price over the 15 trading days from Nov . 17 . Paying a dividend with a discounted DRP option helps the bank meet more retail shareholder needs , with small dilution to shareholders opting to take the cash dividend payment . Management plans a return to semiannual dividends from FY21 . We forecast a dividend payout ratio of 50 % in FY21 and 70 % from 2022 onwards .
Our prior forecasts assumed the bank would raise around $ 1.5 billion over the next two years to help offset pressures from risk-weight inflation and to maintain a strong capital buffer . After already taking 0.16 % off the common equity Tier 1 ratio in FY20 , the bank ' s base case is for an additional 1 % negative impact from risk migration over FY21 and 2022 . This takes the total impact to 1.16 % and on our forecasts will leave the bank above the 10.5 % benchmark at the end of FY22 . For this reason , we no longer assume the bank raises additional equity beyond the DRP on the FY20 final dividend . The bank ' s downside scenario would take another 0.25 % of the capital ratio .
It is extremely encouraging how quickly borrowers have resumed loan repayments . While there remain risks once JobKeeper payments end in March , government support has provided more time for businesses to reopen and individuals to find work . Home loan balances deferred as at Oct . 19 stood at $ 19 billion , down 65 % since March and representing just 4 % of home loans . The dynamic loan / value ratio , or LVR , of deferred loans is 67 %, with 9 % with an LVR above 90 %. Small business loan deferrals balances fell to just $ 1.4 billion , but with the six-month expiry period having just ended for many businesses , more of the Westpac customer base may still need help .
Noncore assets being divested is also a positive in our view , with capital and human resources rightly focused on banking which is the part of the business with higher returns and a competitive advantage . No update was given on timing of potential divestment .
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