The second half profits may reduce due to write-down of assets in Westpac Institutional Bank, additional provisions and transaction costs
Westpac head office in Auckland, New Zealand. (Credit: Ingolfson/Wikipedia.)
Australian lender Westpac announced that its reported net profit for the second half of 2021 (2H21) will be reduced by A$1.3bn ($960m), due to certain ‘notable items’.
The second half of 2021 profits will be affected by a A$965m ($710m) write-down of assets, including goodwill, capitalised software and others in its institutional banking business.
Westpac Institutional Bank (WIB) unit provides financial products and services to commercial, corporate, institutional and government customers.
Additional provisions for customer refunds, payments, related costs, and provisions for the settlement of lawsuits may cut A$172m ($126m) in the second-half profits.
Westpac, in its securities filing, said: “The company cut the value of its Westpac Institutional Banking (WIB) unit by nearly A$1bn after reducing risk in the division through the exit of energy trading, consolidating our Asian operations and reducing our correspondent banking relationships which have all impacted earnings.
“At the same time, medium-term expectations of a prolonged low-interest-rate environment, subdued financial markets income and elevated compliance expenses have impacted WIB’s earnings outlook.”
The company’s previously announced transaction costs along with a deferred tax asset write-off related to the sale of its Life Insurance business may reduce A$267m ($196m).
Westpac Life Insurance Services Limited (WLIS) offers term life, TPD and income protection products under the Westpac, BT and St. George brands.
Also, other costs related to the sale of its Specialist Businesses would reduce the second half profits by A$24m ($17m).
Westpac said that profits from the sale of Westpac General Insurance for $55m, and a reversal of the previous A$54m ($40m) write-downs will party address the charges.
The bank is expected to report its annual results on 1 November 2021, and forecasted its cash profit at A$6.5bn ($4.7bn), without the charges, reported Reuters.
In March this year, Westpac announced plans to shut 48 of its branches and combine the remaining, as part of its efforts to reduce its branch network in the country.