ANZ warns on profit hit before annual results and loan repayment deferrals update

ANZ hands down earnings on Thursday but warned second-half 2020 cash profit will be dented by an after-tax charge of $528m.

ANZ’s statement said it would recognise customer remediation charges in the second half of $188m after tax.

ANZ has joined two of its main rivals in disclosing a hit to second-half profit, just days out from releasing its annual results and an update on loan repayment deferrals.

ANZ, which hands down earnings on Thursday, said second-half 2020 cash profit would be dented by an after-tax charge of $528m due to large notable items, including costs to compensate and repay customers and accelerated software amortisation.

The bank said statutory profit would also see a hit by a similar amount as cash earnings and noted the charge would have about a five-basis-point impact on common equity tier one capital.

ANZ’s update follows Westpac outlining new provisions and charges on Monday, while National Australia Bank aired its profit hit last week.

Both Westpac and NAB report earnings for the 12 months ended September 30 next week.

ANZ’s statement said it would recognise customer remediation charges in the second half of $188m after tax, largely linked to an “acceleration of remediation programs and product reviews”. That takes ANZ’s total remediation tally to $1.59bn after tax since the first half of 2017.

Changes to how ANZ applies its software amortisation policy saw the bank include a $138m after-tax charge in the second half of 2020.

“These changes were made to reflect the increasingly shorter useful life of various types of software assets caused by rapidly changing technology and business requirements,” ANZ’s statement said.

A further charge of $202m after tax included the writedown of goodwill in ANZ’s Pacific business, and the impact of accounting changes on ANZ’s investment in PT Panin and restructuring charges.

Westpac’s disclosure of notable items in its second half came in higher than ANZ and NAB as it also accounted for part of a record $1.3bn penalty it will pay the financial crimes regulator Austrac.

On Monday, Westpac warned cash earnings would take a $1.22bn hit due to writedowns, higher customer compensation and the Austrac penalty.

National Australia Bank last week disclosed a hit to cash earnings of $264m for the six months ended September 30, while the impact on net profit attributable to shareholders would be $450m. That was driven by higher customer compensation, property impairments and a swelling balance to repay staff for an underpayment blunder.

Unlike its peers, Commonwealth Bank has a June 30 year end, although it will provide a quarterly update in coming weeks.