Australian banking group Westpac has said customer remediation costs for poor financial advice will hit cash earnings in the first half of this year by A$260m (£140m, $186m, €164m).
The firm said the cash earnings will be reduced due to provisions for things such as:
- Customer refunds associated with charging ongoing advice service fees by the group’s salaried financial planners;
- Refunds for certain consumer and business customers that had interest only loans which did not automatically switch, when required, to principal and interest loans; and
- Refunds to certain business customers who were provided with business loans where they should have been provided with loans covered by the National Consumer Credit Protection Act.
The provisions exclude any allowance for refunds to customers of authorised representatives in relation to ongoing advice services fees which are still being determined.
Stop the errors
Westpac chief executive, Brian Hartzer, said: “A key priority is to deal with outstanding remediation issues and refund customers as quickly as possible.
“As part of our get it right, put it right initiative, we are determined to fix these issues and stop these errors occurring again.
“We will continue to review our products and services to ensure they deliver the right outcomes for customers, and if necessary, make further provisions.”
Provision estimates
Of the estimated A$260m impact on cash earnings:
- Approximately 90% relate to issues identified in previous financial years;
- Around half of the provisions relate to the financial advice business while the remainder relate to business and consumer banking; and
- Includes costs associated with implementing the remediation programs along with interest on fees to be refunded.
