In a trading update on Monday (25 March) the provisions exclude any allowance for refunds to customers of authorised representatives in relation to ongoing advice services fees which are still being determined.
Of the estimated $260 million impact on cash earnings, approximately 90 per cent relate to issues identified in previous financial years.
Around half of the provisions relate to the financial advice business while the remainder relate to business and consumer banking. The $260 million includes costs associated with implementing the remediation programs along with interest on fees to be refunded.
“A key priority is to deal with outstanding remediation issues and refund customers as quickly as possible,” Westpac CEO Mr Brian Hartzer said.
“As part of our ‘get it right, put it right’ initiative we are determined to fix these issues and stop these errors occurring again. We will continue to review our products and services to ensure they deliver the right outcomes for customers, and if necessary, make further provisions.”
The major remediation item includes customer refunds associated with certain ongoing advice service fees charged by the group’s salaried financial planners.
The additional provisions reflect an increase in the estimated proportion of instances where records of financial advice were insufficient for the purposes of the remediation. As a result, the provision for this item has increased, bringing the estimated proportion of fees that will be refunded to around 28 per cent.
Other remediation items include refunds for certain consumer and business customers that had interest only loans that did not automatically switch, when required, to principal and interest loans.
The impact of remediation on Westpac’s earnings have increased significantly in recent years. The cash earnings impact of customer remediation provisions in full year 2017 and full year 2018 were $118 million and $281 million respectively.