The Hayne royal commission has hit the bottom line of Westpac.
Three days before the end of its 2017-18 financial year, Westpac has flagged a $235 million cut in full-year cash earnings as it increases provisions to refund customers who were charged for poor or non-existent financial advice.
But this doesn’t include legal and other costs associated with the inquiry.
Westpac provided the update a day before the expected release of the banking royal commission’s interim report on Friday.
Westpac shares eased 20 cents to $27.61 on Thursday. the shares are down almost 12% year to date, meaning the market value of the country’s second-biggest bank has fallen by close to $12 billion since the start of the year (the Royal Commission started in February).
Westpac said yesterday that after undertaking a more detailed analysis of fees charged by its financial planners going back to 2008, it had increased provisions for customer refunds where advice was not provided or customers might have received inadequate advice.
The bank said reviews that could lead to further costs related to advice fees charged by its aligned planners would continue into 2019.
“It is disappointing some of our past practices have not lived up to appropriate standards,” chief executive Brian Hartzer said in a statement late Thursday.
“We are committed to fixing any issue identified, as well as ensuring that any customer affected has not been disadvantaged.”
As well as advice fee refunds, the $235 million includes estimated provisions for recent litigation, including costs and penalties flowing from cases brought by the regulator over responsible lending practices and alleged interest-rate rigging.
The bank said about two-thirds of the $235 million impact was expected to be recorded as negative revenue, while the rest would be recorded as costs when it released its results on November 5.
Costs associated with responding to the royal commission were not included in this amount.
Westpac revealed a $4.017 billion cash profit for the first-half of the financial year and analysts had forecast profits of around 8.2 billion on a cash basis. These latest write-downs could see the figure fall just under $* billion.