Westpac hit by $357m of remediation associated with ARs

Westpac has announced its first half cash earnings will be reduced by $357 million to account for provisions for remediation associated with authorised representatives (ARs) in relation to ongoing advice fees.

The bank said in the statement issued to the Australian Securities Exchange (ASX) that it would continue to work with current and prior authorised representatives and their customers to determine where a payment should be provided while the final cost of remediation was still unknown until all relevant information was available and payments had been made.

The $510 million provision (pre-tax) was based on a range of accounting assumptions relating to potential payments of $297 million (pre-tax), interest costs of $138 million (pre-tax) and $75 million (pre-tax) in remediation program costs.

That part of the current estimated provision which related to potential payments represented around 31 per cent of the ongoing advice service fees collected over the period which compared to 28 per cent estimated for salaried planners, it said.

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“While it is disappointing that we have needed to make these provisions, I said at the end of last year that our priority was to deal with any outstanding issues and process payments as quickly as possible,” Westpac’s chief executive, Brian Hatzer, said.

“As part of our ‘get it right put it right’ initiative we are fixing issues and are determined to ensure that they don’t reoccur.”