Compensation Costs Mount At ANZ

By Glenn Dyer | More Articles by Glenn Dyer

ANZ Bank shares fell under $27 dollars yesterday or the first time since Mid June after it revealed some of the damage to its profits for 2017-18 from some of the disclosures from the royal commission.

The shares lost 2.76% to end the day at $26.989 – at that level, they are down near 9% year to date.

The ANZ’s fall saw other bank stocks weaken, and on top of a sell-off in China, the ASX 200 had one of its worst days this year, dropping 85 points or 1.4%

In fact with the ANZ’s statement, the bill for the big banks and AMP from the royal commission disclosures (and more, such as the CBA’s Austrac problem) continues and is more than $2 billion.

The ANZ Monday morning revealed more than $800 million in additional costs for customer compensation as well as write-downs and other losses from changes in its software and in its IT department.

With Westpac revealing a $235 million charge in late September, the Commonwealth Bank a total of $1.1 billion in August (which included the $700 million Austrac fine for money laundering) and the $350 million hit to the AMP for its first half to June, the bill is rapidly rising.

Still to come the impact on the National Australia Bank and more from the Commonwealth over misdealings with some of its customers in its Comminsure business, while the AMP and several insurance companies such as Suncorp will have to reversal provisions for the current half-year next February or before.

Taking what we know so far as the ANZ, Westpac, AMP, and CBA, the total bill is in excess of $2.1 billion – which is around 8% of the estimated $31 billion in full-year profits the banks are expected to report for 2017-18. Some of the ANZ’s losses yesterday relate to write-downs in its technology and software.

The ANZ, which reports its 2017-18 results on October 31, told the ASX that it would be taking an $824 million hit to its annual result due to customer compensation for services that either weren’t provided or were inadequate as well as other charges.

ANZ said the estimated impact on its full-year profit after tax from continuing operations was $697 million, with another $127 million for its wealth business sold to IOOF last year.

These relate to issues that have been identified from reviews to date,” ANZ said in a statement. “These reviews remain ongoing. The unaudited losses and provisions are weighted towards the second half, with $711 million to be recorded in the six months to September 30, according to the ANZ statement.

Of that second-half provision, $374 million relates to customer compensation, $206 million is for accelerated amortisation on software, $104 million is for a restructuring of its technology team, and $27 million relates to external legal costs stemming from the banking royal commission.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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