Bank holds dividend steady despite refund hit
WESTPAC has held its interim dividend despite the cost of refunding customers helping drag first-half profit down by 22 per cent to $3.296 billion.
Australia’s second-largest bank yesterday said it set aside $617 million to cover refunds and associated costs following the financial services royal commission, contributing to the fall in cash earnings for the six months to March 31, from $4.251 billion a year earlier.
Softening house prices and slowing mortgage growth also had an impact, while the bank’s insurance arm copped $94 million in catastrophe claims due to floods in Queensland and December’s hailstorm in Sydney.
Added to that, Westpac took a $136 million hit on the restructure of its wealth unit.
It held its dividend at a fully franked 94¢ – in contrast to rival NAB, which last week slashed its dividend from 99¢ to 83¢ – but Westpac shares still dropped as much as 2.3 per cent. At 11am they were 1.53 per cent lower at $27.015.
Chief executive Brian Hartzer said, while the results were disappointing, the worst may be over for the bank.
“The past six months has been a turning point,” he said.
“We are proactively addressing legacy issues while improving our products and services to ensure they deliver the right customer outcomes.”
Westpac said it had now made $1.45 billion in pre-tax provisions over the past three years for customer remediation programs, including $1.25 billion for refunds.
The bank predicted a challenging second half amid softening house prices and slowing credit growth, with Mr Hartzer likening the conditions facing the banking sector to the 1991 recession.
But he said restoring customer trust was still a priority.
“Despite our 202-year history, we know we still have to win back customers’ trust,” Mr Hartzer said.