Westpac takes $1.2 billion hit to earnings

Westpac takes $1.2 billion hit to earnings

Australia's oldest bank Westpac's (ASX: WBC) financial woes have continued with the bank revealing it would be copping write downs of more than $550 million on its life insurance and auto finance businesses.

It comes after Westpac was slammed by a record fine of $1.3 billion last month when financial intelligence watchdog AUSTRAC revealed the bank had allegedly breached anti-money laundering laws more than 23 million times, including allowing transfers consistent with child exploitation. 

In a statement to the ASX today Westpac announced its cash earnings in the second half of calendar 2020 would be shaved by $1.22 billion after tax, after making additional provisions for AUSTRAC matters along with new items of $816 million.

The bank also warned shareholders that net profit would be hit as a result.

Westpac said the after-tax impact of notable items included a write-down of goodwill and intangibles associated with Westpac Life Insurance Services Ltd and the bank's Auto Finance business, along with a write-down of capitalised software with these items accounting for a total of $568 million after tax.

To cap off a rough start to the week for the banking giant, it wrote off $55 million after a revaluation of life insurance liabilities and a loss on the agreed sale of its vendor finance business. 

The company was spared further blushes thanks to bagging a sizeable profit on the sale of its stake in payments company Zip Co, which kicked in $212 million after Westpac offloaded it last week.

The banking giant said it was increasing the provision and costs associated with the AUSTRAC proceedings to $415 million, up from $04 million in provisions associated with the civil penalty and AUSTRAC's legal costs. 

Westpac also set aside an extra $182 million in provisions for customer refunds, repayments, associated costs, and litigation provision.

The banking group is scheduled to announce its 2020 full year results on Monday, 2 November 2020.

WBC shares were down 0.37 per cent to $18.71 at 10:51 AEDT.

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