Today, Westpac had announced an anticipated change to its provisions, expecting a new and probably increased value to it as well as asset write-downs. This will total in an approximate of $1,430 million after-tax. As one would imagine, this will put a dent in the earnings of the Group for 2020’s first half (1H20). These items will also enact a reduction in statutory net profits after tax.
Expecting To Dock Out $900 Million
After the proceedings that AUSTRAC had launched back on the 20th of November, 2019, Westpac had been in discussions and mediations with AUSTRAC. These talks were made with the goal of agreeing to a Statement of Agreed Facts and Admissions, coupled with the proposed penalty that could be put to the Court with Austrac, using a joint basis.
Westpac has taken the information available to the Group, before concluding that the expected provision for the entire debacle would be around $900 million. This accounts for all potential liabilities expected in regards to the claims from AUSTRAC.
Rolling With The Punches
In the end, the decision from the Court in regards to appropriate penalties will hinge on a broad array of different, complex, and competing factors. It must thus exercise discretion, according to Westpac. Westpac stated that the actual penalty paid by the Group after a joint submission or a settlement was made on the penalty may be lower or even higher than the provision made, as it’s only an estimate on something yet to happen.
Furthermore, Westpac expects another hit, primarily from cash earnings. The expected amount clocks in at $130 million in cash and the costs have been linked to the AUSTRAC response plan in order to help improve its financial crime programs.
Furthermore, it will provide further support and resources working to eradicate the exploitation of children, as well as support initiatives within the industry to monitor financial crime. When the numbers are crunched, the total cost for all this, pre-tax, stands at about $160 million and includes the response plan estimates that had been disclosed prior, which totaled at $60 million. This stands alongside higher levels of costs linked to the enhancement of the Group’s financial crime program, as well as higher levels of legal expenses.
Other items that may affect the results for 2020’s first half for Westpac, is the overall reduction in the value of several assets, which cost $70 million after-tax. An increase in provisions in regards to customer refunds, litigation, and repayments has been set to about $260 million after-tax. Lastly, an expected cost of provision changes of group life insurance has been set at around $70 million after-tax.