Saying Sorry Has a $3.5 Billion Price for Australia’s Big Banks
Saying Sorry Has a $3.5 Billion Price for Australia’s Big Banks
(Bloomberg) -- The bill to shareholders for Australian banks’ bad behavior has now topped A$5 billion ($3.5 billion), and could rise further.
Westpac Banking Corp. on Wednesday became the latest lender to set aside additional sums to compensate customers for mis-charged fees, junk products and poor advice in what analysts have called “confession season” ahead of earnings reports. That takes the total after-tax bill since the second half of 2018 to A$5.1 billion, according to calculations based on figures from Bloomberg Intelligence.
The costs add to the challenges facing Australia’s banks, which are grappling with a tougher earnings outlook thanks to a slowing economy and record-low interest rates that are crimping margins.
The concern for investors is whether this will escalate as the companies investigate historic files. For a cautionary tale on how costs can spiral, they only have to look to the U.K.’s experience with the mis-selling of payment protection insurance, or PPI.
Despite U.K. bank executives’ repeated assurances that an end was in sight, costs kept mounting, with the total bill for refunds and administration now topping 53 billion pounds ($68 billion) -- dwarfing the cost of major scandals like Libor rigging.
To contact the reporter on this story: Emily Cadman in Sydney at ecadman2@bloomberg.net
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward, Katrina Nicholas
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