ANZ shares slide after it flags hit to earnings from remediation charges

ANZ shares have tumbled after it flagged a $374m blowout in the sum it will need to repay customers wrongly charged fees.

ANZ follows Westpac in announcing new charges. Pic: Hollie Adams

ANZ shares tumbled to below $27 a share for the first time since June after it revealed a $374 million blowout in the money it will need to pay back to customers who were charged fees where no service had been given, along with associated remediation and regulatory costs.

At the close, ANZ shares had fallen 73 cents, or 2.63 per cent, to $26.99.

ANZ, in an announcement which follows Westpac’s own $235 million impairment for refunds for overcharged customers last month, said it had spent almost $40 million on the banking royal commission so far.

The surprise remediation bill could mean other major banks are soon to announce increases to their own compensation bill.

Like Westpac, ANZ has had to pay more money out to customers who were charged fees for no service. ANZ said it was also repaying money charged for inappropriate advice, following a number of reviews of its Australian operations.

The Australian Securities & Investments Commission earlier this year said the likely damage wrought by the fees-for-no-service scandal across the industry could top $1 billion in refunds.

ANZ said it was expecting the bill for complying with Kenneth Hayne’s royal commission to reach $55 million.

The bank also flagged impairments for restructuring and for the amortisation of software, and said it will book charges of $739m in the second half of its financial year.

The various charges are expected to reduce ANZ’s closely-watched Common Equity Tier 1 capital position by less than 10 basis points.

The bank, which is scheduled to report its annual results on October 31, recorded a net profit of $6.41 billion and cash earnings of $6.94bn for the year through September 2017.

Later this week, the major banks will be hauled before the House of Representatives economics committee to face questioning at Parliament House.

The belatedly-announced increases in customer compensation are likely to be a hot topic for MPs grilling the bank chief executives.

For the chief executives of the four major banks, it will be the first time they are properly scrutinised over the interim findings made by the royal commission, as they have nominated more junior executives and managers to face questioning by counsels assisting the Commissioner Hayne’s inquiry.

ANZ’s new compensation bill represents an $185 million increase on the estimated impact made at the end of last financial year, to a new total of just under $300m.

Meanwhile, the financial sector is preparing to be inundated with class action claims following a series of damaging revelations at the royal commission.

AMP was served with five separate class actions after it admitted charging customers fees where no service was given. The separate cases are expected to be wrapped into a single lawsuit.

ANZ says it expects to book charges of $739 million in the second half, including $374m for customer refunds and other remediation costs.

It’s the second big bank in under two weeks to warn of mounting remediation costs in the wake of the banking royal commission.

ANZ (ANZ) said the costs followed product reviews in Australia and inappropriate advice or services that weren’t provided within its former aligned dealer operations.

The reviews that have identified issues within its business are continuing, it said.

The bank also flagged $55m in legal costs for the full-year, linked to the bank’s response to the Hayne royal commission, as well as $104m in restructuring charges in its technology divisions.

The bank has also accelerated amortisation of certain software assets, mainly related to its international business, costing $206m for the second half.

The various charges are expected to reduce ANZ’s closely-watched Common Equity Tier 1 capital position by less than 10 basis points.

The bank, which is scheduled to report its annual results on October 31, recorded a net profit of $6.41 billion and cash earnings of $6.94bn for the year through September 2017.

Late last month, Westpac said it expected a $235m sting to its full-year earnings from ongoing efforts to refund customers who were charged fees for advice that wasn’t delivered and the cost of recent lawsuits.

With Dow Jones