Why Westpac’s (ASX:WBC) earnings may fall in 1H21


  • Westpac Ltd (ASX:WBC) says its cash earnings in the first half of 2021 might shrink due to some additional provisions.
  • The additional provisions include customer refunds, payments and other associated costs, along with an accounting loss on sale in Westpac Pacific.
  • In 1H21, the cash earnings are expected to come down by AU$282 million (after tax).

Westpac Ltd (ASX:WBC) on Monday said that its cash earnings in the first half of 2021 would be negatively impacted due to additional provisions for customer refunds, payments and other associated costs, along with an accounting loss on sale in Westpac Pacific.

Source: © Cammeraydave  | Megapixl.com

In 1H21, the cash earnings would come down by AU$282 million (after tax), Westpac said in its latest update. Even the statutory net profit would be lowered.

READ MORE: Capital markets will be key going forth

Notable factors set to impact earnings

Additional provisions for customer refunds, payments, associated costs, and litigation provisions of AU$220 million.

  • Write-down of capitalised software and other intangibles of AU$115 million
  • Costs associated with ending the Group’s relationship with IOOF of AU$56 million
  • Write-down of goodwill related to Lenders Mortgage Insurance of AU$84 million,
  • Accounting loss on sale in Westpac Pacific along with transaction costs and payments associated with divestments of AU$113 million.

READ MORE: Markets next week: Key things to watch out for

Change in software capitalisation policy

Westpac also said that it had changed its software capitalisation policy, increasing the threshold before a project is capitalised to AU$20 million (previously AU$1 million). This policy has been applied from 1 October 2020 and would see the Group expend a higher portion of its investment spending from first half 2021.


Source: ©  Showface  | Megapixl.com

READ MORE: World sees 5.7 million cases in a week as COVID-19 wreaks mayhem

Stock performance

On Friday, 23 April 2021, the stock of Westpac closed at AU$25.12, up 0.010 points, or 0.040 per cent, as against the previous closing on Thursday, 22 April 2021. The stock has given a return of nearly 28 per cent so far this year. Westpac competes with Commonwealth Bank of Australia (ASX:CBA), Netwealth Group Ltd (ASX:NWL), Hub24 Ltd (ASX:HUB), AUB Group Ltd  (ASX:AUB), Janus Henderson Group plc (ASX: JHG), and National Australia Bank (ASX:NAB) in the financial sector.

READ MORE: Telemedicine witnesses a boom amid COVID-19: A look at 3 ASX stocks  

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK