Westpac signals $A1.4b in writedowns

WESTPAC Group, the parent of one of New Zealand’s largest trading banks, told the ASX yesterday of $A1.4 billion ($NZ1.47 billion) in writedowns as the Covid19 outbreak and other issues affect its fortunes.

Its moneylaundering compliance issues, customer refunds and asset writedowns would all take their toll, the bank indicated in its detailed statement.

It said it would finalise ‘‘significant’’ provisions for loan losses due to the coronavirus outbreak and would give a further update on those costs before its halfyear results on May 4.

Profits were expected to be lower than last year.

‘‘Westpac today announced expected new and increased provisions, excluding impairment provisions and asset writedowns totalling around $1430 million after tax, which will reduce firsthalf 2020 [1H20] cash earnings,’’ the business said.

Statutory net profit after tax would also be cut, according to the announcement from Westpac chief executive Peter King.

Westpac was now also doing a detailed analysis to finalise its impairment provisions for its first half.

That was expected to include a significant collective provision increase, which would lift the group’s total provision balance for credit losses expected from the Covid19 outbreak.

Legal proceedings launched last year by financial intelligence agency AUSTRAC are the main driver of the provisions announced yesterday. The bank said it would set aside $A1.03 billion for costs associated with the case, which it has said it intends to settle, flagging ‘‘provisions and costs associated with the AUSTRAC proceedings and response plan of $A1030 million after tax’’.

‘‘Westpac plans to update the market once this impairment charge has been finalised and prior to the announcement of its 1H20 results on May 4,’’ it said.

Westpac said it expected to report lower cash earnings from its first half, which would be taken into account when considering dividends.

A decision on dividends would be made by the board in finalising group accounts, it said.

Westpac shares closed at $A15.98 on the ASX yesterday, down from $A25.81 in late February. — The New Zealand Herald