ANZ Bank, the Australia-based parent of New Zealand’s largest bank, says its 2019 cash profit will be hit by an $559 million after-tax charge to cover the costs of remeditaing over-charging and mis-selling products to its customers.
The remediation charge stems from issues identified from past and present reviews, including those highlighted in Australia’s banking Royal Commission.
ANZ chief financial officer Michelle Jablko said: “We recognise the impact this has on both
customers and shareholders. We are well progressed in fixing issues and have a dedicated
team of more than 500 specialists working hard to get any money owed back to customers as quickly as possible.”
The bank had already put aside A$928 million before tax to address remediation costs following the sector-wide abuses exposed by the Hayne Royal Commission.
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Rival Westpac has also made provisions totalling A$1.4 billion while National Australia Bank, which owns the BNZ, recently set aside an extra $1.2b to refund customers for dubious insurance and financial advice.
ANZ split the remediation charges into A$405m for continuing operations and A$154m for discontinued operations. It sold 23 businesses in the six months ended March, freeing up A$12 billion of capital.
The charges are largely related to product reviews in Australia Retail & Commercial for fee and interest calculation and related matters, ANZ said.
“These include historical matters recently identified during the period, as well as refinements to estimates of existing customer compensation programs and associated costs.”
ANZ is due to report full-year profit later this month.
The bank reported statutory group profit of A$3.17b for the six months ended March, down 5 per cent from the previous first half, and a flat A$6.4b for the 12 months ended September last year.
The first-half net profit from its New Zealand operations fell 4 per cent as profits from retail lending eased amid a slowing housing market.
The need for remediation within financial services companies was unmasked by Australia’s royal commission into financial services which reported earlier this year after discovering myriad problems including institutions charging for services never delivered and charging dead people.
The Australian review prompted New Zealand’s prudential regulator, the Reserve Bank of New Zealand, and the market conduct regulator, the Financial Markets Authority, to conduct their own review of New Zealand financial institutions.
The government is planning legislation based on their findings.
ANZ’s New Zealand-listed shares have been released from a trading halt put in place ahead of the announcement.
The shares recently traded up 13c, or 0.45 per cent, at NZ$29.32 on the NZX.
– Additional reporting BusinessDesk