Westpac CEO Brian Hartzer gave an update on the personnel and client transfer from defunct wealth brands Securitor and Magnitude to licensee Viridian during a results call punctuated by a $2.5 billion capital raising.

Exactly 157 employees were moved to Viridian during the financial year, Hartzer revealed, and “around 14,000” individual customers.

The staff numbers roughly match the 160 headcount Viridian CEO Glenn Calder said transferred over on July 1, after the firm entered a ‘sale agreement’ with Westpac in July for its Securitor and Magnitude brands. This number is understood to include around 90 financial advisers.

Calder told Professional Planner in July the number of clients that transferred over was 7,000, which means another 7,000 have made the switch to Viridian in the interim.

Hartzer was frank about the impact remediation and wealth management exit costs had on the bank during the year. “Our result was impacted by customer remediation costs and the reset of our Wealth business,” he noted.

The bank has spent or provisioned $241 million for its wealth management “reset” in 2019 and continues to expects costs of up to $300 million in the coming period. It also booked an after-tax cost of $958 million for reimbursements and associated costs in 2019. Over 600,000 customers have so far received over $350 million in refunds.

Westpac has established a “remediation hub”, the CEO explained on a media call following the announcement, to primarily handle victims of the fee-for-no-service scandal that erupted during the Hayne royal commission.

“We’ve provided for everything we know and can possibly test,” Hartzer said. “Our focus is now on getting the money to back to customers as quick as we can.”

“We are 60 per cent of the way through our known customer issues,” added chief financial officer Peter King.

The bank flagged lower income from its Panorama platforms due to fee compression, which was marked by a reduction in its fee base to 0.15 per cent in July 2018. King boasted, however, that the platform was now “complete” and the fastest growing on the market with over $23 billion of funds under administration.

Remediation costs aside, the bank pointed out the savings it will make next year after jettisoning its loss-making wealth management arm.

“The exit of the advice business and resetting the Group’s wealth operations is expected to reduce costs by around $245 million per annum by 2020,” it stated in the full year financial results.

‘A disappointing year’

Headline numbers for Westpac reflect what Hartzer characterised as a “challenging, low-growth, low interest rate environment”.

Cash earnings for the bank were down 15 per cent to $6.85 billion, leading Hartzer to announce a final dividend cut from 94c to 80c per share.

“2019 has been a disappointing year,” admitted the CEO, who forwent a $1.6 million bonus payment upon his own recommendation to the Westpac board. Hartzer pocketed a salary of $4 million for the year.

On the dividend cut, he said it was “prudent” to reset and give the bank a sustainable base. “Banking is going through a once-in-a-generation transition,” he said. “We know we have to run the bank more efficiently to remain competitive.”

The $2.5 billion capital raising announced by Hartzer will be made up of a fully underwritten institutional placement of $2 billion and a share purchase plan of $500 million.

UBS analyst Jonathan Mott said while the soft results may lead to “consensus downgrades”, the capital raising should help strengthen the balance sheet ahead of further regulatory changes.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at tahn.sharpe@conexusfinancial.com.au
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