The big four bank has said its second-half earnings will plummet by $1.2 billion due to write-downs of its life insurance business and further provisions for its record-breaking corporate fine.
In a statement to the market on Monday, Westpac said its cash earnings for the second half of 2020 would be reduced by $1.22 billion after tax, arising from “notable items” including a write-down of goodwill and intangibles associated with Westpac Life Insurance Services and its auto finance business, as well as a $415 million increase in provisions resulting from its AUSTRAC fine agreed in September.
The bank said the valuation of its life insurance business had been written down after a review found it “did not support the carrying value of its intangibles”.
Westpac also flagged a further $182 million increase in provisions for remediation, with $78 million put aside for payments to wealth customers including some who were incorrectly charged insurance trail commissions post-FOFA or had their advice fees incorrectly disclosed.
Further, the bank revealed a $55 million reduction in earnings due to asset sales and revaluations, with revaluations of its life insurance liabilities and a loss on the sale of its vendor finance business being offset by the positive revaluation of its holding in buy now, pay later group Zip Co.
Westpac said it would release its full financial results for the second half of 2020 on 2 November.