Westpac Banking Corp’s full-year earnings will be sliced by $235 million due to additional payouts the bank has made to customers over-charged for financial advice, including “where advice services were not provided”.
After the market closed on Thursday – and on the eve of the release of the banking royal commission’s interim report – Westpac said it had “increased provisions for customer refunds” relating to salaried financial planners charging excessive fees going back to 2008.
It has also been forced to compensate customers “who may have received inadequate financial advice from Westpac planners”, and to “resolve legacy issues” relating to a review of products.
Westpac also flagged additional hits to earnings could follow in the 2019 financial year, given it is “continuing to investigate and consider potential further costs associated with advice fees charged by our aligned planners”.
The new provision – which represents around 3 per cent of the bank’s full-year profit – also includes costs and penalties relating to its recent court settlements with the Australian Securities Commission which sued it for allegedly breaching responsible lending laws and manipulating the benchmark interest rate.
The payouts to advice customers appear to exceed refunds made by National Australia Bank, which said in July it will refund $67 million to superannuation customers were charged hundreds of dollars in annual fees since 2012 for financial advice services they did not know they could opt out of.
“It is disappointing some of our past practices have not lived up to appropriate standards,” Westpac CEO Brian Hartzer said in a statement filed with the ASX. “We are committed to fixing any issue identified, as well as ensuring that any customer affected has not been disadvantaged.”
Westpac said that notwithstanding its new provisions, it “remains well placed to meet APRA’s unquestionably strong capital benchmark”.
Westpac will report full year results on November 5.