Westpac (ASX: WBC) has seen its profits dive in 1H19 thanks to major remediation and restructuring items.
At the end of the half the group recorded a net profit of $3.2 billion, down 24 per cent on 1H18, with earnings down 22 per cent to $3.3 billion.
The group says profits were hit by provisions for estimated customer refunds, repayments and associated costs of $617 million as well as costs associated with the reset of the company's wealth strategy totalling $136 million.
At the end of 1H18 the group recorded a statutory net profit of $4,198 million, meaning profits have dived by over $1 billion.
Despite this dip Westpac's interim dividend remains unchanged at 94 cents per share, fully franked. The company's dividend has remained at 94 cents per share since 2H15.
"This is a disappointing result reflecting weaker business conditions and the bank dealing decisively with outstanding issues, including remediation and resetting our wealth strategy," says Westpac CEO Brian Hartzer.
During the half the company saw $146 million of expenses removed in 1H19, putting the company on track to meet its cost reduction target of $400 million by the end of the 2019 full year. The company also cut 788 full time staff during the half.
Hartzer says the company expects to pull through these difficult business conditions following the Royal Commission into the banking and finance sector.
"The past six months has been a turning point for the bank," says Hartzer.
"We are proactively addressing legacy issues while improving our products and services to ensure they deliver the right customer outcomes," says Hartzer.
"We're exiting personal financial advice to focus on the parts of our wealth business where we have a competitive advantage, and we are delivering significant cost savings by simplifying our business."
The CEO also says the company is focusing on restoring customer trust.
"Despite our 202-year history, we know we still have to win back customers' trust," says Hartzer.
"We have improved complaints handling, removed all teller incentives, and introduced new digital initiatives including a virtual chat assistant for Westpac and digital mortgage applications for St. George, BankSA, and Bank of Melbourne."
"Overall the clarity of our strategy, the size and strength of our growing customer franchise, the quality of our people, and our strong balance sheet puts us in good stead to navigate the challenges of this low growth environment."
Remediating aggrieved customers is a priority for the company, and Westpac currently has dedicated $1.4 billion to work on it. Over 400 employees are working on these projects to ensure they are completed as soon as possible.
Flat wages growth and a soft housing market means Westpac has forecast a subdued remainder of the financial year.
"We are dealing decisively with a difficult commercial environment for banks, delivering productivity savings while we continue to simplify our products, digitise our business, and modernise our platforms," says Hartzer.
"Although the second half will continue to be challenging, we believe our service-led strategy remains the best way to create value for our shareholders."
Shares in Westpac are down 0.73 per cent to $27.24 per share at 10.35am AEST.
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