Westpac 1H19 Provisions for Authorised Reps

ASX
ANNOUNCEMENT

30 April 2019

WESTPAC 1H19 ACCOUNTING PROVISIONS FOR AUTHORISED
REPRESENTATIVES
Westpac today provided an update on accounting provisions for remediation associated with
authorised representatives in relation to certain ongoing advice service fees.
This follows its 25 March 2019 ASX announcement on remediation provisions, where it
announced an increase in provisions for its salaried planners and indicated that assessments
were underway in relation to authorised representatives.
Authorised representatives are advisors who maintain direct relationships with their customers
for financial planning services, while operating under the Magnitude and Securitor
1
advice
licenses. These advisors received ongoing advice service fees from their customers of
approximately $966 million between 2008 and 2018.
Based on the information currently available, Westpac today said that its cash earnings in First
Half 2019 will be reduced by $357 million for accounting provisions associated with this matter.
The $510 million provision (pre-tax) is based on a range of accounting assumptions relating to
potential payments of $297 million (pre-tax), interest costs of $138 million (pre-tax) and $75
million (pre-tax) in remediation program costs. That part of the current estimated provision which
relates to potential payments represents around 31% of the ongoing advice service fees
collected over the period which compares to 28% estimated for salaried planners.
Westpac will continue to work with current and prior authorised representatives and their
customers to determine where a payment should be provided. The final cost of remediation will
not be known until all relevant information is available and payments have been made.
We are yet to finalise our remediation approach which may change following industry and
regulator discussions. This may alter the estimates used in determining this provision.
Westpac CEO Mr Brian Hartzer said: “While it is disappointing that we have needed to make
these provisions, I said at the end of last year that our priority was to deal with any outstanding
issues and process payments as quickly as possible.
“As part of our ‘get it right put it right’ initiative we are fixing issues and are determined to ensure
that they don’t reoccur.”


1
Magnitude Group Pty Ltd and Securitor Financial Group Ltd are wholly owned subsidiaries of Westpac Financial
Services Group Limited.

2
The total impact on cash earnings in First Half 2019 associated with provisions for customer
remediation programs is $617 million (pre-tax $896 million).
The table below summarises the impact for the First Half 2019 of significant provisions for
estimated customer refunds, payments and costs, as well as provisions following the reset of
the Group’s wealth businesses announced on 19 March 2019.
Significant provisions to
be included in Westpac’s
1H19 result ($m)
Consumer
Bank
Remediation
Business
Bank
Remediation
BT Financial Group
Total
Remediation Wealth reset
Net interest income
(47) (161) (4) 0 (212)
Non - interest income
0 (13) (587) 0 (600)
Net operating income
(47) (174) (591) 0 (812)
Expenses
31 (14) (101) (190) (274)
Core earnings
(16) (188) (692) (190) (1,086)
Tax
14 57 208 54 333
Cash earnings / net
profit
(2) (131) (484) (136) (753)

Westpac is scheduled to release its First Half 2019 financial results on 6 May 2019.

FURTHER ENQUIRIES
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David Lording
Head of Media Relations
M. 0419 683 411
Investor Relations:
Andrew Bowden
Head of Investor Relations
T. 02 8253 4008
M. 0438 284 863