Pay-back time: Westpac flags $235m earnings hit

Westpac announced this afternoon it will slash its cash earnings for the 2018 full year by around $235 million in order to increase provisions for customers stung by poor advice.

Westpac said the $235 million also includes increased provisions for refunds to customers who paid advice fees for services that were not provided.

“It is disappointing some of our past practices have not lived up to appropriate standards,” Westpac CEO, Brian Hartzer said.

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“We are committed to fixing any issue identified, as well as ensuring that any customer affected has not been disadvantaged.”

Money will also be put towards “legacy issues” and litigation fees.

The bank will not be sharing exact figures until the release of its Full Year 2018 results, however it did note that the costs associated with its response to the Royal Commission aren’t included in this particular sum.

The major lender is set to continue reviewing its products into 2019, including investigations into its adviser practices and potential future costs.

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Westpac’s announcement comes amid calls for the Royal Commission into the banking and finance sector to be extended.

Acting Labor leader, Tanya Plibersek told reporters today of how lawyers and counselors she’s met with have been surprised by the extent and severity of the revelations uncovered by the commision.

She continued, “If there is a case the commission needs to extend the time it has allocated to it, to speak to more people…that option should be on the table.

“Despite the fact there have been about 9,000 submissions, only about 27 Australian customers have had the chance to tell their stories.”

Earlier this year, the Royal Commission heard about a couple whose retirement dream was destroyed following flawed advice from a Westpac financial planner.

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The adviser had suggested they set up a self-managed super fund (SMSF) to purchase and run a bed and breakfast, so they couple could retire. However, after selling their family homes in the hope of moving into the to-be-purchased B&B, they were informed that SMSF members are unable to live in a property which they are invested in.