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Westpac takes 62% profit hit

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Westpac’s performance in First Half 2020 was significantly impacted by the COVID-19 pandemic, legal costs and impairment charges.

 

First Half 2020 financial results were considerably lower over both the prior half and prior corresponding period due to the immediate and expected flow-on impacts of COVID-19 on impairment charges

Net profit attributable to owners of Westpac Banking Corporation for First Half 2020 was $1,190m, a decrease of $1,983m or 62% compared to First Half 2019.

First Half 2020 included a significant increase in impairment charges due to the expected economic impact of the COVID-19 pandemic, costs associated with AUSTRAC proceedings including a provision for a potential penalty, and the impact of estimated customer refunds, payments, associated costs and litigation, which together reduced net profit before tax by $3,008m..

The provisions and costs related to the Australian Transaction Reports and Analysis Centre’s (AUSTRAC) civil proceedings against Westpac in relation to alleged contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act.

These civil proceedings contributed to board and management changes and led to a provision for a potential penalty along with additional costs, including from the group’s Response Plan.

 In aggregate, these costs reduced cash earnings in First Half 2020 by over $1 billion.

 Secondly, the financial services sector, including Westpac, has continued to respond to the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry

Impairment charges were $1,905m higher compared to First Half 2019 reflecting the rapid deterioration in the economy as a result of the COVID-19 pandemic which has led to a significant increase in the expected credit losses the group has estimated under AASB9.

Westpac states, “Asset quality was sound, with stressed exposures as a percentage of total committed exposures at 1.32%, up 22 basis points compared to First Half 2019.

“Given that COVID-19’s economic impact only escalated in March 2020, these metrics do not fully reflect the more challenging position beginning to emerge across the economy and its impact on customers.”

 


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