Westpac added $46 million to the cost of compensating customers

  • Westpac is booking $281 million in costs associated with compensating customers.
  • This will drag down the bank’s full year cash earnings, due to be announced next week.
  • The amount is $46 million higher than first estimated.

Westpac has upped its estimate of the cost of remediating customers by $46 million to a total of $281 million.

The amount, which doesn’t include costs associated with responding to the financial services Royal Commission, will reduce the bank’s full year cash earnings, due to be released next week.

“Following additional analysis and further regulatory engagement, the provisions/costs have now been finalised,” the bank said today.

Westpac’s last month announced cash earnings would be cut by an estimated $235 million after a more detailed analysis by the bank of fees charged by its financial planners going back to 2008.

The fee for no service scandal, a key point of investigation by the financial services royal commission, and other scandals could cost major financial institutions as much as a combined $1 billion in compensation.

Westpac had paid $6.89 million in compensation to the end of June.

The latest provision is for customer refunds associated with advice fees, for inadequate financial advice, the cost of litigation in the bank bill swap rate fixing case, and costs of implementing remediation.

The cut could cut full year cash earnings to below $8 billion compared to last year’s $8.06 billion. Westpac lifted cash earnings by 6% to $4.25 billion for the half year to March.

In a quarterly update in August, the bank reported declining net interest margins, falling 11 basis points to 2.06%, due to higher funding costs.