- Westpac says its full year cash earnings for 2018 will be cut by an estimated $235 million.
- This follows more detailed analysis by the bank going back a decade on customer issues.
- The provision includes refunds associated with fees charged for services not provided.
Westpac’s full year cash earnings will 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, due to release its 2018 results on November 5, had paid $6.89 million in compensation to the end of June.
The latest provision could cut full year cash earnings to close to $8 billion, flat on 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 last month, the bank reported declining net interest margins, falling 11 basis points to 2.06%, due to higher funding costs.
“It is disappointing some of our past practices have not lived up to appropriate standards,” says Westpac CEO Brian Hartzer.
“We are committed to fixing any issue identified, as well as ensuring that any customer affected has not been disadvantaged.”
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 bank says details of the provisions are still being finalised. The program of reviews will continue into 2019, including potential further costs associated with advice fees charged by our aligned planners.
And costs associated with responding to the financial services Royal Commission are not included in this estimate.
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