Westpac pledges to bring back proper dividend payments for shareholders in 2021

Australia’s second largest bank says it will do better in 2021 and pledges to pay its shareholders a proper dividend in the coming year.

Westpac has pledged shareholders will see a return to normal dividend payments in 2021 following a tumultuous year that has swiped the bank’s profits by 66 per cent.

At the country’s second largest bank’s annual general meeting, Westpac chief executive Peter King affirmed the embattled bank had accelerated plans to fix its risk compliance failures that led to a money laundering scandal in 2019 and subsequent record fine.

Mr King conceded the $1.3 billion payout due to the scandal in combination with the financial damage caused by the coronavirus pandemic resulted in of the largest profit slumps in the bank’s history. However, he noted the company was determined to create long-term value for shareholders.

“The 2020 financial year was clearly disappointing, with reported profit down 66 per cent,” Mr King said in his opening address.

Westpac chief executive Peter King said the embattled bank had accelerated plans to fix its risk compliance failures. Picture: Jane Dempster/The Australian.

“Much of the fall was due to our own issues, including the AUSTRAC penalty. COVID directly impacted us contributing to slower loan growth, lower margins, higher expenses, and a material increase in impairment charges.”

The banking regulator at the beginning of the pandemic issued guidance that capped dividend payments to only 50 per cent of statutory profits.

Westpac chairman John McFarlane said: “Going forward, I’m hopeful we will return to a more consistent dividend each half.”

Westpac’s money laundering scandal has tainted the major financial institution’s public image for the last 12 months, with the financial crimes watchdog revealing 23 million breaches of Australia’s anti-money laundering and counter-terrorism financing laws.

AUSTRAC’s investigations uncovered Westpac had allowed account holders to transfer money overseas to fund human trafficking and child exploitation in Southeast Asia.

Westpac chairman John McFarlane said many of the issues the bank was facing ‘were of our own doing’. Picture: Adam Yip

Westpac admitted to the governance failings and committed to a risk overhaul in relations to its management of financial crime.

The Australian Prudential Regulation Authority (APRA) and Westpac last week entered into a court enforceable undertaking, which was instigated after the regulator found the bank’s proposed compliance changes were not far reaching across the organisation.

Mr McFarlane, who became chair following the resignation of Lindsay Maxsted at the company’s last AGM, said the board would oversee the implementation of the risk management changes.

“We have improved non-financial risk management but still have more to do to ensure issues of this kind do not happen again,” Mr McFarlane said.

“Many of the issues we faced were of our own doing, particularly the AUSTRAC matter. This simply should not have occurred, and I apologise genuinely on the company’s behalf.”

Mr King also used the AGM to reaffirm Westpac’s “fix, simplify and perform” strategy, which was to fix the bank’s complex governance structures and to slim down and simplify operations to core banking.

Mr King also used the AGM to reaffirm Westpac’s ‘fix, simplify and perform’ strategy. Picture: NCA NewsWire / James Gourley

The simplification to core banking services is an industry-wide move, with a number of large firms divesting from other business operations such as insurance and wealth and asset management.

“As part of the agreement we will deliver an integrated remediation plan with independent oversight and we will report quarterly on our progress,” Mr King said.

“We are exiting some businesses and implementing a business operating model to speed up decision making, improve end-to-end accountability and ultimately enhance performance.”

Proxy voting from Friday’s AGM showed 97.3 per cent of investors supported the bank’s remuneration report, which had previously decided short-term bonuses would not be paid due to the money laundering scandal.

Roughly 13 per cent of proxies voted against the re-election of non-executive director Peter Nash, while Mr McFarlane had a proxy vote position of 94.4 per cent in favour.

Originally published as Westpac pledges to bring back proper dividend payments for shareholders in 2021