Westpac fattens remediation bill
Ahead of the release of its half-year financial report next Monday, Westpac has provided an update on its provisioning for remediation. It said cash earnings for the March half would be reduced by A$357 million after provisions for remediation associated with authorised representatives in relation to ongoing advice service fees.In March, the bank announced that first-half cash earnings would be reduced by $260 million because of provisions associated with service fees charged by salaried financial planners.Yesterday's announcement concern a different group of planners - authorised representatives who operated under the Magnitude and Securitor advice licences.These advisers received ongoing advice fees from their customers of about $966 million between 2008 and 2018. The bank says pre-tax costs of $510 million include $297 million of payments to customers, $138 million of interest costs and $75 million of remediation program costs.In other words, the bank is paying back almost a third of the advice fees its authorised representatives received from customers over a 10-year period. In the case of salaried advisers the payback is about 28 per cent.Westpac said the final cost of remediation would not be known until "all relevant information is available". It is working with current and prior authorised representatives and their customers to work out what payments needed to be made.The bank said the total impact of provisions for estimated customer refunds, payments and costs - including consumer bank, business bank and wealth remediation - would be a reduction of $753 million in cash earnings in the half.