You are here
Australia's Westpac flags US$359m provision for refunds, sees profit hit
[SYDNEY] Australia's Westpac Banking Corp said it will set aside A$510 million (S$488 million) to refund customers who had been charged fees for services not rendered, as it seeks to rebuild its image following revelations of misconduct in a sector-wide inquiry.
The charge will reduce Westpac's reported cash earnings for the six months to March by an additional A$357 million, raising the total hit for the half to A$617 million.
The No.2 lender in Australia said the provision was related to remediation and potential refunds of service fees charged by its network of self-employed advisers, who received total advisory fees of A$966 million over 2008-2018.
"While it is disappointing that we have needed to make these provisions ... our priority was to deal with any outstanding issues and process payments as quickly as possible," Chief Executive Officer Brian Hartzer said.
Westpac is due to report earnings on May 6, and analysts have largely priced in the extra charges in their estimates.
All major Australian banks have increased provisions related to efforts to remediate customers for banking misconduct, under pressure from regulators after the Royal Commission last year revealed a widespread practice of illegally charging fees without providing services.
While lenders have accounted for billions in potential liabilities related to wrongful charges by their employees, they have been slower to estimate the refunds of fees charged by their much larger network of self-employed financial advisers.
Analysts believe that once those provisions are accounted for, the bulk of the remediation provisions related to known misconduct should be out of the way.
They expect National Australia Bank to add to its A$1.1 billion in remediation provisions to account for its self-employed advisers, while Australia and New Zealand Banking Group is also expected to add to its provisions.