Westpac has announced it has created a new specialist business division to simplify its wealth platforms, superannuation and retirement products, investments, general and life insurance, and auto finance businesses.
The bank announced the new division in its interim results posted to the Australia Securities Exchange (ASX) and said those businesses did not have sufficient scale or had insufficient returns for the risk.
The Westpac Pacific business would also be managed in the division to simplify the institutional bank portfolio.
Former Commonwealth Bank chief executive of Newco, Jason Yetton, had been appointed to lead the division as chief executive, specialist businesses and would commence the new role on 18 May, 2020.
Westpac noted the division contributed 10% of the indicative FY19 revenue.
Westpac chief executive, Peter King, said:” These are good businesses with strong franchises and will benefit from being in their own division under the leadership of Jason who will bring his considerable energy and skills to the role.
“Over the coming months we will conduct a detailed strategic review on the best options for these businesses. This will include considering whether they would ultimately be more successful under different ownership.
“The changes today are a significant step to reducing the complexity of our portfolio and will allow the group executives to focus on improving performance in our Australian and New Zealand banking businesses.”
The bank also announced that its net profit was down 62% ($1.98 billion) during the first half of 2020, compared to the first half of 2019.
Westpac said the result was due to impairment charges thanks to the impact of the COVID-19 pandemic, costs associated with AUSTRAC proceedings, including provision for a potential penalty, and the impact of estimated customer refunds, payments, associated costs and litigation, which together reduced net profit before tax by $3 billion.
It noted that it had provisioned $900 million for a potential penalty relating to the AUSTRAC civil proceedings brought against it on 20 November, 2019.
In a letter to its shareholders, the bank said it would not be paying shareholder dividends in June 2020.
“The decision was difficult, and the board considered the uncertain economic and operating conditions and how these may develop over the next six months, and also the Australian Prudential and Regulation Authority’s consistent guidance on dividends,” King said.
“We recognise many shareholders rely on our dividends as a source of income and fully recognise the impact these decision have. However, we must remain prudent at this point in time. The board will continue to review the dividend options over the course of this year.”