Westpac has warned bushfires, storms and the coronavirus outbreak will compound the mounting regulatory costs and fallout from legal action following last year’s money laundering and child exploitation scandal.
The big four lender expects to “incur additional expenses” and will “reconsider its current cost growth expectations” as the number of investigations into its business pile up following the AUSTRAC scandal.
The bank faces potentially billions in fines over allegations it breached money laundering laws 23 million times and failed to properly monitor payments potentially linked to child sex offences in Southeast Asia.
The scandal claimed the scalp of chief executive Brian Hartzer and chairman Lindsay Maxsted, and shareholders handed the bank a historic second strike on executive pay at its annual general meeting in December.
The bank was also forced to set aside an extra $500 million in capital as prudential regulator APRA and corporate watchdog ASIC investigate the actions of the bank’s top brass.
Westpac said on Wednesday that summer bushfires, storms and the coronavirus outbreak were also expected to have an economic impact, which may ultimately affect its banking activity and growth.
The firm’s economics team has moderated its Australian GDP forecast for calendar year 2020 to 1.9 per cent, down from 2.4 per cent forecast in November.
Shares in Westpac were 0.7 per cent lower at $25.57 by 1142 AEDT, having dipped as low as $25.51 in earlier trade.
Meanwhile, Westpac’s insurance claims for severe weather events were estimated to be $140 million pre-tax at February 14.
Westpac’s response plan was initially expected to result in $80 million in FY20 pre-tax expenses.
It has also been slapped with two class action suits and is bracing for more and concedes it is likely to cop “a significant civil penalty”.
Commonwealth Bank was fined a record $700 million fine in 2018 for serious breaches of the same AUSTRAC laws.