Update on Customer Compensation and Software Amortisation
ANZ today announced that its Full Year 2018 Cash Profit will be impacted by additional charges for customer compensation, accelerated amortisation of software and other notable items.
Customer compensation
Charges of $374 million[1] have been recognised in 2H18 for refunds to customers and related remediation costs. These relate to issues that have been identified from reviews to date. These reviews remain ongoing.
Approximately 57% relates to customer refunds impacting revenue, with the balance relating to remediation costs recorded as an expense. The total remediation charge is split approximately 66%/34% between Continuing and Discontinued operations.
Key items of customer remediation include:
- Compensating customers for issues arising from product reviews in the Australia Division.
- Compensation for customers receiving inappropriate advice or for services not provided within ANZ’s former aligned dealer groups[2].
Software amortisation
ANZ has accelerated the amortisation of certain software assets, predominantly relating to its International business. This follows a recent review of the International business along with a number of divestments announced or completed this year. Accelerated amortisation expense of $206[1] million will be recorded in 2H18.
Other notable items
Along with announced divestments and the matters above, the following notable items will be highlighted in the FY18 Results Announcement:
- Restructuring charges of $104[1] million in 2H18, largely relating to the previously announced move of the Australia and Technology Divisions to agile ways of working.
- External legal costs associated with responding to the Royal Commission which will total $55 million (pre-tax) for FY18.
The impact of these additional charges on ANZ’s Common Equity Tier 1 capital position compared to 1H18 is expected to be less than 10 basis points.
ANZ’s FY18 Results Announcement will be released on 31 October 2018, with a results template to be issued in late October.
The following tables are provided to illustrate the impacts of the above items.
[1] All items are approximates on an unaudited after tax basis (in the applicable tax jurisdiction) unless otherwise stated
[2] ANZ completed the sale of its Aligned Dealer Groups to IOOF on 1 October 2018
