Westpac (ASX:WBC) - CEO, Peter King
CEO, Peter King
Source: Westpac
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  • Shares in Westpac (WBC) take a hit as the banking giant announces a $1.3 billion blow to full-year profits in light of major asset writedowns and extra provisions for potential regulatory action and customer refunds
  • The bulk of the impairment comes from a $965 million write-down of assets in Westpac Institutional Bank (WIB)
  • Other profit blows come from previously announced costs associated with the sale of Westpac’s life insurance division
  • CEO Peter King says the one-off blows reflect the bank’s simplification strategy and risk-reduction practices as well as a tough operating environment
  • Shares in Westpac closed down 1.65 per cent at $25.63 each

Shares in Westpac (WBC) have taken a hit today after the banking giant announced a $1.3 billion blow to full-year profits in light of major asset writedowns and extra provisions for potential regulatory action and customer refunds.

The fresh profit hit is on top of the $300 million Westpac has already set aside for customer remediation payments and legal costs in the aftermath of the Hayne Royal Commission.

The bulk of today’s impairment comes from a $965 million write-down of assets in Westpac Institutional Bank (WIB).

Westpac slashed the value of the goodwill of the institutional bank to zero following an annual impairment test of the business arm.

This comes as the bank continues to consolidate its operations in Asia and following its exit from energy trading.

Other profit blows come from previously announced costs associated with the sale of Westpac’s life insurance division.

The lender said it expected the impairment charges to reduce its Common Equity Tier 1 (CET1) ratio by 15 basis points. This ratio compares a bank’s capital against its risk-weighted assets as a measure of the entity’s ability to withstand financial stress.

Nevertheless, Westpac CEO Peter King said the one-off blows reflected the bank’s simplification strategy and risk-reduction practices as well as a tough operating environment.

“While 2021 has been a better year for us than 2020, we are still dealing with a number of historical issues,” Mr King told staff, according to The Australian.

“Over the last year, we have simplified and reduced risk in WIB through exiting energy trading, consolidating our Asian offices and reducing our correspondent banking relationships.

“While these actions have reduced risk in WIB, they have also reduced revenue.”

The bank added that the writedowns would have no impact on regulatory capital or on customers.

Westpac said the impairments would be slightly offset by its $55 million gain on the sale of Westpac General Insurance and a reversal of $54 million in write-downs associated with Westpac Pacific, given this business segment is no longer held for sale.

Westpac will provide further details around the profit hit in its upcoming annual financial report, slated for release on November 1.

Shares in Westpac closed down 1.65 per cent at $25.63 each

WBC by the numbers
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