The Westpac Banking Corp (ASX: WBC) share price was sliding slightly today after the bank formally acknowledged the start of civil proceedings against it.
The issue relates to fees for no service uncovered by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
ASIC proceedings
The Australian Securities and Investments Commission (ASIC) has launched the civil proceedings against two entities within the Westpac group: BT Funds Management Limited and Asgard Capital Management.
Allegations concern the inadvertent charge of financial adviser fees to 404 bank customers totalling $130,006, after a request had been made to remove the financial adviser from the customer accounts. The two Westpac entities accept the allegations and do not intend to defend the proceedings. However, the entities will make submissions regarding the appropriate penalty.
Additionally, BT Funds and Asgard Capital Management will make submissions on the penalty and will work with the regulator to resolve the proceedings as quickly as possible.
Westpac self-reported the issue to ASIC in July 2017, and customers have been contacted and remediated.
June quarter update
The proceedings follow Westpac's decision to suspend its dividend earlier this week after its June quarter results.
It announced unaudited statutory net profit of $1.12 billion and cash earnings of $1.32 billion.
Net interest margin was down 8bps including notable notable items to 2.05% driven by low interest rates.
Westpac increased its impairment charge to $826 million to cover potential losses induced by the coronavirus pandemic.
Additionally, its common equity, tier 1 ratio remains unchanged at 10.80%.
78,000 mortgages worth $30 billion are currently in deferral which is down from 135,000 mortgages worth $51 billion. Following the three month check-in, around half are expected to return to making payments.
What does this mean moving forward?
Given these uncertain times, it's difficult to predict what the near future holds for the Westpac share price.
Westpac Group CEO Peter King said the bank had maintained its strong balance sheet and increased provisions for bad debts to support a "prudent approach" to managing impairments.
"While there have been some signs that the economy is performing better than early expectations, significant uncertainty remains, particularly given the unpredictability of COVID-19 outbreaks and their local impacts," he said.
Westpac continues to offer its customers deferral support where needed and follow-up in periodic check-ins.
The Westpac share price was down 1.26% to $17.18 in late afternoon trade today.
