Westpac defers payout

It’s the most difficult result in years, says chief

WESTPAC has joined rival ANZ in deferring payment of an interim dividend to shareholders after posting a first-half profit slide following hefty impairment charges related mainly to the COVID-19 pandemic.

Australia’s second-largest lender reported a 70 per cent slump in cash earnings to $993 million for the six months ended March 31, from $3.30 billion a year earlier.

Net profit was down 62 per cent to $1.19 billion.

“This is the most difficult result Westpac has seen in many years. It is significantly impacted

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Change by higher impairment charges due to COVID-19, as well as notable items including the Austrac provision,” chief executive Peter King (pictured) said in a statement.

“In light of the changed economic outlook we have increased Westpac’s provisions for expected credit losses to $5.8 billion, which includes approximately $1.6 billion of additional impairment charges predominantly related to COVID-19 impacts,” he said.

Westpac had last week announced the $1.6 billion impairment charge for potential loan defaults from customers due to the COVID-19 related shutdown. Yesterday, the bank said its board recognised the uncertain economic and operating conditions and how these may develop over the next six months while taking the decision to defer dividends.

The board also accepted recent guidance from prudential regulator APRA on dividends and is being prudent at this point in time.

The lender had paid a fully franked interim dividend of 94 cents a share a year ago.

Westpac’s profitability was also hit by $900 million for a potential legal penalty from Austrac anti-money laundering proceedings.

The bank is accused of 23 million breaches of antimoney laundering laws and the final penalty will be paid following either a settlement and joint submission on a penalty, or a hearing, with additional costs related to its financial crime response plan.

Westpac said it had continued to support customers through the COVID-19 crisis, with 105,000 home loan accounts – with total loan value of $39 billion – put on hold.

Another 31,000 Australian business loans, worth $8.2 billion, have also been put on hold.

Cash earnings in its business lending division fell 51 per cent from a year ago to $604 million, mostly linked to the economic outlook as a result of COVID-19.

However, Westpac’s balance sheet remained strong, Mr King said.