Regulatory impacts drag on Westpac profit
Westpac is the latest of the major banks to report a less than stellar result from its wealth management divisions as it registered a seven per cent decline in statutory net profit of $7.445 billion to the Australian Securities Exchange (ASX) today.
Westpac chief executive, Brian Hartzer, described the result as "solid" in a challenging environment with the directors declaring a final, fully-franked dividend of 94 cents per share.
However the impact of regulatory costs represented the underlying story for the bank's wealth management arm, BT Financial Group (BTFG), with Hartzer referring to higher regulatory and compliance costs offsetting solid growth in funds under management (FUM), funds under administration (FUA), and insurance premiums.
He also noted that the group's partial sale of BT Investment Management (BTIM) had impacted the result.
However a drill-down on the BTFG result revealed that cash earnings declined by $38 million and that growth in lending, FUA, and insurance premiums "were more than offset by a decline in funds management income along with higher regulatory and compliance expenses".
It said the lower funds management income was mostly due to the partial sale of BTIM ($24 million) and a lower contribution from Ascalon.
The ASX announcement said Private Wealth income was higher and average FUM and FUA were up two per cent and four per cent respectively although these increases were more than offset by lower advice income and a reduction in the value of investments in Ascalon funds due to weaker markets and a rise in the Australian dollar.
The announcement again referenced regulatory and compliance costs increasing significantly thorugh the year.
Discussing the outlook for Westpac over the next financial year, Hartzer said it remained in a strong position to respond to the volatile global environment.
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