SYDNEY (Businesshala) – Australia’s Westpac Banking Corp said on Tuesday it would charge a one-time fee of $1.3 billion ($956 million) against its second-half profit after its institutional banking unit left the energy business for other reasons.
The country’s second-largest lender by market capitalization also downgraded its earnings outlook, citing financial markets as “dull”.
Westpac said the one-time fee includes provisions for paying customers seeking treatment for the wrongly charged fee and costs associated with the sale of its life insurance unit.
The company cut the value of its Westpac Institutional Banking (WIB) unit by approximately $1 billion to “reduce risks in the divestiture through exiting the energy business, strengthening our Asian operations and reducing our correspondent banking relationships.” which has affected all earnings”. it said in a securities filing.
“At the same time, medium-term expectations of a prolonged low interest rate environment, weak financial markets earnings and higher compliance expenses have impacted WIB’s earnings outlook,” the bank said.
Payments and other costs associated with settling customer lawsuits will add another $172 million in one-time fees, while costs associated with the sale of its life insurance unit and tax adjustments will add $267 million in lump-sum items.
The bank is scheduled to report annual results on November 1, and was expected to post a cash profit of $6.5 billion, roughly the same as last year’s results, according to the average forecast of 13 analysts surveyed by Refinitiv before the charges were announced. The treble was hit by the COVID-19 loan repayment freeze and other macroeconomic shocks.
Shares of Westpac were trading down 0.5% in early trading Tuesday against a flat overall stock market.
($1 = 1.3602 Australian Dollar)