Westpac has announced that its cash earnings in the first half of the 2021 financial year (1HFY21) will be reduced by $282 million (after tax), while its statutory net profit will also be reduced due to what it said are notable items.
The notable items after tax include the write-down of goodwill in the group’s lenders mortgage insurance business as it is now held for sale.
The $84 million expense impact was disclosed in Westpac’s 1Q21 update in February 2021, Westpac said.
Another notable item after tax includes additional provisions for customer refunds, payments, associated costs, and litigation provisions of $220 million.
Another notable item includes an accounting loss on the sale of Westpac Pacific along with transaction costs and payments associated with divestments totalling $113 million.
Of the $282 million in notable items, $212 million were announced in Westpac’s 1Q21 market update, with the remaining net cash earnings impact of $70 million (after tax) occurring in 2Q21.
Westpac confirms sale of businesses
Westpac has also confirmed that it is looking to sell several of its businesses, and said additional information to be included in Westpac’s 2021 interim financial results will be the release of details of businesses under the “held for sale” designation.
This has followed agreements to sell certain businesses within the specialist businesses division, including Westpac Lenders Mortgage Insurance, Vendor Finance, Westpac General Insurance, and Westpac Pacific.
As a result of this presentation change, Westpac Group’s consolidated balance sheet will include a separate “held for sale” line item in both assets and liabilities, which will include the sum of items relating to these businesses.
The held for sale classification is only effective from the first half of 2021, and therefore prior periods are not presented on a held for sale basis, Westpac said.
The major bank said it has also changed its software capitalisation policy, increasing the threshold before a project is capitalised to $20 million (previously $1 million).
This policy has been applied from 1 October 2020, and will result in Westpac group expensing a higher portion of its investment spending from the first half of 2021. This higher expense will not be treated as a notable item, the group said.
The group also said that it will continue with its existing segment reporting in its 2021 interim financial results, and the presentation of the results would not be affected by the decision to combine its consumer and business divisions into a new consumer and business banking division.
Westpac will announce its first half 2021 results on 3 May.
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Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.