Westpac has flagged a $1.2 billion hit to earnings ahead of its full-year results next week.
The losses were partly offset by an increased valuation of its holding of buy now,pay later platform Zip Co by $303 million,whichbecame effective before Westpac sold its shares last week.
Westpac has also put aside an additional $182 million to compensate customers who were sold incorrect loans,overcharged or provided with poor advice. As part of this increased provision,$104 million will pay for running the remediation program and $38 million will be used for settling legal disputes with customers.
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Last Wednesday,the Federal Court agreed Westpac should pay a fine of $1.3 billion, the largest civil penalty in Australian corporate history,after negotiations with financial crimes watchdog AUSTRAC over 23 million breaches of anti-money laundering and counter-terrorism financing laws.
Westpac had initially put aside $900 million for the penalty,but agreed to pay a higher price due to the serious and systemic weaknesses in its systems that failed to properly monitor and report suspicious payments,some linked to child abuse in south-east Asian countries.
Australia's second-largest bank said the asset write-downs were partly caused by COVID-19.
Disability insurance losses are being felt across the industry,with research by auditing firm KPMG finding total retail disability losses widened by $122 million to $1.1 billion across the financial year. The prudential regulator last month threatened to hit insurers with a capital charge unless they stopped selling unsustainable disability insurance products.