Westpac has pledged shareholders will see a return to normal dividend payments in 2021 following a tumultuous year that has swiped the bank’s profits by 66 per cent.
At the country’s second-biggest bank’s annual general meeting, Westpac chief executive Peter King affirmed the embattled bank had accelerated plans to fix its risk compliance failures that led to a money laundering scandal in 2019 and subsequent record fine.
Mr King conceded the $1.3 billion payout due to the scandal in combination with the financial damage caused by the coronavirus pandemic resulted in one of the biggest profit slumps in the bank’s history.
However, he noted the company was determined to create long-term value for shareholders.
“The 2020 financial year was clearly disappointing, with reported profit down 66 per cent,” Mr King said in his opening address.
“Much of the fall was due to our own issues, including the AUSTRAC penalty. COVID directly impacted us contributing to slower loan growth, lower margins, higher expenses, and a material increase in impairment charges.”
The banking regulator at the start of the pandemic issued guidance that capped dividend payments to only 50 per cent of statutory profits.
Westpac chairman John McFarlane said: “Going forward, I’m hopeful we will return to a more consistent dividend each half.”
Westpac’s money laundering scandal has tainted the major financial institution’s public image for the past 12 months, with the financial crimes watchdog revealing 23 million breaches of Australia’s anti-money laundering and counter-terrorism financing laws.
AUSTRAC’s investigations uncovered Westpac had allowed account holders to transfer money overseas to fund human trafficking and child exploitation in South-East Asia.
Westpac admitted to the governance failings and committed to a risk overhaul in relations to its management of financial crime.
The Australian Prudential Regulation Authority and Westpac last week entered into a court-enforceable undertaking, which was instigated after the regulator found the bank’s proposed compliance changes were not far reaching across the organisation.
Mr McFarlane, who became chair following the resignation of Lindsay Maxsted at the company’s last AGM, said the board would oversee the implementation of the risk management changes.
“We have improved non-financial risk management but still have more to do to ensure issues of this kind do not happen again,” Mr McFarlane said.
“Many of the issues we faced were of our own doing, particularly the AUSTRAC matter. This simply should not have occurred, and I apologise genuinely on the company’s behalf.”