may have to cough up $2 Billion in current fiscal year 2019 as Morgan Stanley quadrupled its customers refunds and remediation estimates ahead of banks full-year results release due in November.
Earlier Morgan Stanley estimated $500 million repayment to customers including fines and penalties from major banks in the financial year 2019, but it has now pushed the estimates four times higher to $2 billion in FY19 which can lead to experience sector-wide downturn in earnings per share. It has been said that earning per share across the banking sector may fall by approximately 4% in 2017-18 and 1% in 2018-19. Looking into FY20 Morgan Stanley estimates $875 million repayments by major banks for advice failing and inaccurate charges.
Why Morgan Stanley quadrupled its refunds and remediation estimates for ANZ, CBA, WBC and NAB?
It seems to be the recent repayments announcement that have ballooned by major banks. Since the last few weeks major Banks have announced strict action to repay their customers in respect of charging dead customers for advice and fees for no services to the living.
Westpac flagged a payout of $235 million to its customers over-charged for financial advices, including the cases where even no services were given. These Banks efforts to repay customers have been initiated after the Hayne Royal Commission accused major banks for charging fees-for-no-services and advice fees from the dead customers.
announcement for $375 million charge has added to the precision of returning customers money charged wrongly. Where the latest is the Commonwealth Bank’s decision to refund advice fees to the dead customers with interest.
This has brought Morgan Stanley to pull down its 2018-19 cash earnings forecast for the big four banks. It has anticipated a reduction in cash earnings per share for ANZ
by 2.8%, for CBA
by 3.2%, and for NAB
and Westpac, it is expected to go down by 4.9% and 3.7%, respectively.
Ahead of bank industry reporting season analysts anticipates few major issues that may decide the stream of share price movement. These determinants include banks strategies for reinvestment and cost-cutting, pattern in funding costs and plans for margin expansion in future, programs for customer remediation and compliance policies. Although refunds and remediation programs will have almost negligible impact on FY18 results, it may cast other considerate challenges in the banking sector.
Let’s take a snapshot of stock performance of these big four banks:
Australia and New Zealand Banking Group Limited (ASX: ANZ
) has edged up in today’s trade. Its stock has gone up by 0.186% to $26.880 today, 10th
October 2018. The stock has seen a performance change of -9.66% over the past one year.
Commonwealth Bank of Australia’s (ASX: CBA
) stock has surged by 0.32% to close at $68.970 today. However, the stock has fallen by 10.38% over the past one year.
National Australia Bank Limited’s (ASX: NAB
) stock was up by 0.263% to $26.680 and the share price of Westpac Banking Corporation (ASX: WBC
) increased by 0.037% to $26.980 today.
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