Westpac has flagged that its cash earnings will be hit by a $1.2 billion blow as the bank writes down the value of its Life Insurance business, pays penalties and repays customers.
In a note to shareholders this morning, Westpac advised that when it presents its full year 2020 financial results on Monday November 2, investors can expect a blow to its top line results.
Much of the damage to the bank's cash earning is already known.
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Last month Westpac agreed to pay $1.3 billion over alleged breaches of anti-money laundering laws, noted at the time as the largest fine in Australian corporate history.
Today the bank said it expects an increase in the costs of this penalty of $415 million, including $404 million previously announced due to court costs.
The bank will also set aside $182 million in provisions for customer refunds, repayments and litigation provisions.
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Notably Westpac will also be writing down Westpac Life Insurance Services and its Auto Finance business to the tune of $568 million after tax.
The bank said the global coronavirus pandemic has pulled value from some of the technology Westpac would use and sell to other businesses.
"Following a review, the valuation of our life insurance business did not support the carrying value of its intangibles and so they have been written down. The cost of this write-down was $406 million," the bank said in a statement.
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"The impact of COVID-19 on asset values combined with the previously announced review of capitalised software has contributed to an impairment of capitalised software for some IT systems.
"The pre-tax cost of this write off is $71 million."
Westpac's stock is currently trading at $18.76, having fallen 0.11 per cent since the announcement.
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