Westpac has said it expects to see $1.6 billion of impairment charges related to the impact of the COVID-19 pandemic in the first half of 2020, bringing the total pre-tax impairment charges for the period to $2.2 billion.
In a note on the Australian Securities Exchange (ASX) today, the big four bank said the other impairment charges related to individually assessed provisions and net write-offs.
The total charges equated to 62 basis points of gross annualised loans, compared to nine basis points for the same period a year ago.
Westpac said the COVID-19 related charges were divided into three categories; changes to base case economic forecasts, increasing the weighting applied to the downside economic scenario and an industry-by-industry assessment of additional stress that could emerge in relation to COVID-19.
Chief executive, Peter King, said: “Having materially strengthened capital over the last decade, building significant buffers, we are well positioned to absorb this increase and respond to future developments in the environment".
The charges could increase in subsequent periods as the firm said the outlook remained "highly uncertain".
“Westpac notes the COVID-19 outbreak is still in its early stages and the impact on customers along with future impacts on the bank, remain highly uncertain. While impairment provisions have begun to increase, the extent of additional charges in subsequent periods on the severity and duration of the decline in economic activity and the size and effectiveness of stimulus measures,” it said.
Full first-half results would be issued on 4 May, 2020.