Write-downs take a $1.3 billion sledgehammer to Westpac profits

Write-downs take a $1.3 billion sledgehammer to Westpac profits

Write-downs and other significant items will reduce Westpac’s (ASX: WBC) second-half profit by $1.3 billion, as announced today by the big four bank.

The company says the hit is the result of nearly $1 billion in writing down assets in its Westpac Institutional Bank following an annual impairment test, provisions for customer refunds of $172 million, previously announced separation costs relating to the sale of Westpac Life Insurance Services of $267 million, and $24 million in costs associated with the divestment of its specialist businesses.

For context, the company bagged a $3.4 billion profit in the first half alone, following a 66 per cent profit drop for the full year in 2020 with NPAT of close to $2.3 billion. The group reports for the 12 months to 30 September.

Westpac, Sydney’s second-largest listed company, says the charges and write-downs were partly offset by a gain on the sale of Westpac General Insurance of $55 million, and a reversal of the previous write-downs associated with Westpac Pacific of $54 million as the business is no longer held for sale.

The news comes during a period of slimming down for the company which has recently offloaded a raft of subsidiaries and is in the process of divesting even more.

During just this half alone, Westpac has sold three businesses: Vendor Finance, Westpac General Insurance and Westpac Lenders Mortgage Insurance.

Three more businesses are walking out the door soon too, with Westpac Life Insurance Services, Westpac Life-NZ-Limited and its motor vehicle dealer finance and novated leasing subsidiary all under sale agreements.

The first of those three, Westpac Life Insurance Services, will be sold to Japan’s Dai-ichi Life for $900, while the New Zealand life insurance business is being bought by Fidelity Life Assurance for $373 million.

The company also plans to offload BT Panorama, an administration platform for 9,000 registered advisers, accountants and their clients with more than $100 billion in funds under administration, early next year. Macquarie Group (ASX: MQG) and IOOF (ASX: IFL) are among the parties interested.

The selling spree is part of a return to basics for Westpac which announced last year plans to dump $4 billion in wealth assets considered non-core so that it could turn its attention to regular banking activities.

Shares in WBC are down 0.54 per cent to $25.92 per share at 10.16am AEDT.

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