Westpac has completed its A$3.5 billion off-market share buyback but not before the bank’s falling share price forced it to improve the offer by changing the buyback tender discount range.

Westpac announced yesterday that it has bought back 167.5 million shares, representing 4.6 per cent of issued capital. As a result, the bank’s common equity tier 1 capital ratio was reduced by 79 basis points.

The buyback price was $20.90 a share, representing a 6 per cent discount to the “market price” of $22.24 – the volume weighted average price of the shares over the five trading days up to and including February 11.

When Westpac launched the buyback in November last year, it said the discount range would be 8 to 14 per cent of the market price. But by the middle of December the stock price had fallen close to 20 per cent and the bank changed the discount range to 0 to 10 per cent “to improve the potential return of the buyback”.

The change was in recognition of the prospect that the falling share price would reduce the value of franking credits to be distributed as part of the buyback.

The buyback price of $20.90 a share breaks down into a capital component of $11.34 and a dividend component of $9.56. Adding the value of franking credits, the bank calculated the “tax value” of the buyback at $24.14 a share.

The bank said the tax value was calculated in accordance with ATO Tax Determination TD 2004/22 and Practice Statement PSLA 2007/9.

The bank said that in the end there was strong demand for the buyback and it scaled back some applications.