Of the $341 million impact on cash earnings in the second half, approximately 72 per cent relates to customer payments (including interest) while the rest relates to costs associated with running these remediation programs.
The larger items over the half related to provisions associated with financial advice. The majority of new provisions are related to ongoing advice service fees and changes in how the time value of money is calculated including extending the forecast timing over which payments are likely to be made.
Westpac said the current estimated provision associated with authorised representatives now represents 32 per cent of the ongoing advice service fees collected over the period. For salaried planners the estimated percentage is 26 per cent.
“A key priority in 2019 has been to deal with outstanding remediation issues and refund customers as quickly as possible,” Westpac CEO Brian Hartzer said.
“The additional provisions announced today are part of that commitment. As part of our ‘get it right put it right’ initiative we are determined to fix these issues and stop these errors [from] occurring. 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 additional provisions put Westpac’s total remediation costs for 2019 at $1.13 billion.