Westpac profit falls 22% as banking royal commission proves costly

The fallout from the banking royal commission has cost Westpac about $1.45 billion.

The effects of the banking royal commission have been felt by Westpac, which reported a 22 per cent slide in its half-year profit.

The major lender said it had put aside $617 million to cover customer refunds and other costs related to the fallout of the widespread inquiry into the sector.

The company’s profit for the six months to March 31 was down to $3.296 billion.

The royal commission also pressured the major lenders to restructure wealth management divisions, which resulted in Westpac booking a direct loss of $136 million.

“The past six months has been a turning point,” chief executive Brian Hartzer said.

“This is a disappointing result reflecting weaker business conditions and the bank dealing decisively with outstanding issues.

“We are proactively addressing legacy issues while improving our products and services to ensure they deliver the right customer outcomes.

“We’re exiting personal financial advice to focus on the parts of our wealth business where we have a competitive advantage, and we are delivering significant cost savings by simplifying our business.”

Westpac chief Brian Hartzer says the fallout from the royal commission has been costly.

Mr Hartzer admitted the country’s second largest bank had a lot of work to do to win back customers’ trust, saying Westpac had made changes to improve how it handles complaints while removing teller incentives.

The company said the controversies exposed in the royal commission had cost Westpac $1.45 billion over the past three years.

“We are centralising oversight of all remediation programs and have more than 400 employees working directly on remediation projects to make refunds to customers as quickly as possible,” the chief executive said.

Mr Hartzer said the bank had repaid about $200 million to customers in the past year-and-a-half and expects more progress to be made this year to win back trust.

“To safeguard against future issues, work is underway across the group to strengthen governance, improve culture and deliver more consistent customer outcomes,” he said.

“As part of our ‘get it right, put it right’ initiative we are determined to fix issues and stop these errors occurring again.

“We will continue to review our products and services to ensure they deliver the right outcomes for customers.”

The bank’s recovery would also be impacted by consumers being cautious amid flat wage growth and continued weakness in the housing market, Mr Hartzer said.

He said the timing of the banking inquiry as well as the softening of the Australian economy had put pressure on Westpac’s next few years.

“We are implementing the recommendations of the royal commission and other industry initiatives while continuing to invest in technology and digital platforms,” Mr Hartzer said.

“Although the second half will continue to be challenging, we believe our service-led strategy remains the best way to create value for our shareholders.”

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Originally published as Westpac profit falls 22% as banking royal commission proves costly