Escalating compo threatens ANZ dividend
ANZ Bank is under pressure to cut its final dividend after it revealed another blowout in customer remediation costs.In its second half accounts that will be unveiled at the end of this month, the country's fourth largest bank will book A$559 million in additional expenses to compensate customers who were gouged or short-changed on a range of financial services products.The fresh remediation costs are to cover apparently systemic cases of overcharging bank customers and inappropriate advice given to wealth clients.All of the additional costs relate to customer abuses that emerged or were identified during the six months to the end of September.ANZ yesterday came under fire for not giving precise details on the nature of the recently identified remediation cases or any information on how many customers were affected.The bank only disclosed that most of the new remediation expenses related to overcharging of retail and commercial banking customers on fees and interest.Chief financial officer Michelle Jablko highlighted the impact that the service failures were having on customers and other stakeholders but declined to articulate what they were about."We recognise the impact this has on both customers and shareholders," she said in a filing to the ASX."We are well progressed in fixing issues and have a dedicated team of more than 500 specialists working hard to get any money owed back to customers as quickly as possible." ANZ's failure to explain the depth of the problems that needed remediation sits rather awkwardly with its assertion that it was "well progressed in fixing issues".A bank spokesman told Banking Day after the disclosure was made to the ASX that more details about the provision would be revealed at the annual profit announcement on 31 October.The expenses blowout has conditioned bank analysts to expect each of the major banks to absorb more remediation hits in 2020.Evans & Partners analyst Matt Wilson has lowered his 2020 earnings forecasts for the sector in light of ANZ's latest disclosure."We continue to expect that conduct will remain a lingering drag for the sector, and our numbers already capture another $2,150 million in 2020 - $500m for ANZ," Wilson told clients in a report."NAB is unlikely, in our view, to end up with the most conduct charges, and hence we expect the sector to play catch up in time. "Whilst issues in wealth have dominated recent conduct provisions, as ANZ's announcement today demonstrates, banking related issues will likely grow." Wilson suggested that investors who had expected the banks to enter the current financial year with a clean slate - free of extraordinary cost items - would be disappointed.In its filing ANZ left open the possibility of more big remediation bills after noting that its 500 member remediation team had not completed reviews of products."The charges relate to issues that have been identified from reviews to date and these reviews remain ongoing," the bank said. ANZ scrip, which closed up 12 cents or 0.4 per cent to $27.42, performed in line with its three major bank peers. CBA was strongest