Westpac’s interim profit next week will take a $582 million hit from provisions for refunds and litigation, write-downs and a range of other “notable items”, the bank told the ASX in a Monday announcement.
The losses seemed like a list of balance sheet ‘clean up’ items, some new, some old and already announced.
Westpac said the write downs and other losses would be part offset by $306 million in gains. These include a $288 million gain on the revaluation of its minority stake in Coinbase, a crypto-currency exchange that floated this month, and an $18 million gain on the sale of its stake in buy now pay later group, Zip Co.
That $306 million of gains will help offset the losses and write downs detailed in Monday’s announcement:
Westpac said these losses include:
- additional provisions for customer refunds, payments, associated costs, and litigation provisions of $220m;
- write-down of capitalised software and other intangibles of $115m;
- costs associated with ending the Group’s relationship with IOOF, $56m;
- write-down of goodwill related to Lenders Mortgage Insurance of $84m; and
- an accounting loss on sale in Westpac Pacific along with transaction costs and payments associated with divestments, $113m.
These losses were partly offset by:
- a net gain on the revaluation of the Group’s investment in Coinbase Inc. of $288m,
- a gain on sale of the Group’s holding in Zip Co Ltd, $18m.
Of the $282m in notable items, $212m were announced in our 1Q21 Market Update with the remaining net cash earnings impact of $70m (after tax) occurring in 2Q21.
Westpac will be the first major bank to report its half-year earnings next week, with it strongly tipped to unveil a plan for significant cost cuts.
Westpac said $212 million of the notable items were announced in its first-quarter results, and $70 million of the impact occurred in the most recent March quarter.
Westpac shares rose 0.08% to $25.14.
