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Major bank haemorrhages $374m in remediation costs

Major bank haemorrhages $374m in remediation costs

Remediation and royal commission costs, among other expenses, are set to place added pressure on a big four bank’s bottom line.

ANZ has reported that its full-year 2018 (FY18) financial results will, among other newly divulged expenses, account for $374 million in remediation costs and $55 million in legal costs incurred from the financial services royal commission.

The major bank has noted that customer compensation charges of $374 million relate to issues that have been identified from reviews, which “remain ongoing”.  

ANZ stated that approximately 57 per cent of the compensation charges relate to customer refunds impacting revenue, with the balance relating to remediation costs recorded as an expense.

The lender added that the total remediation charge is split approximately 66 per cent/34 per cent between continuing and discontinued operations.

The items of customer remediation listed by ANZ include:

  • compensating customers for issues arising from product reviews in its Australia division
  • compensation for customers receiving inappropriate advice or for services not provided within ANZ’s former aligned dealer groups

ANZ has also revealed that its FY18 results would also account for the following expenses:

  • restructuring charges of $104 million in 2H18
  • external legal costs associated with responding to the financial services royal commission which will total $55 million (pre-tax) for FY18

The major bank also noted that the impact of the additional charges on ANZ’s Common Equity Tier 1 capital position compared to 1H18 is expected to be less than 10 basis points.

Software amortisation charges

Further, ANZ has said that it has accelerated the amortisation of certain software assets, which predominantly relate to its international business, following a recent review of its international business along with a number of divestments announced or completed in FY18.

As a result, ANZ has reported that an accelerated amortisation expense of $206 million will be recorded in 2H18.

[Related: To HEM or not to HEM? Is that the question?]

Major bank haemorrhages $374m in remediation costs
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