Westpac has announced a change in software capitalisation policy, as well as expectations that statutory net profit for 2021 first half year (1H21) will be reduced due to “notable items”.
In a statement issued on the Australian Securities Exchange (ASX), the bank noted it increased the software capitalisation threshold before a project from AU$1 million to AU$20 million.
“This policy has been applied from 1 October 2020 and will see the group expense a higher portion of its investment spending from first half 2021,” Westpac said.
“The higher expense is not treated as a notable item.
“This change had no impact to the carrying value of capitalised software at 30 September 2020.”
Westpac also announced it would write-down the value of capitalised software and other intangible assets to around AU$115 million. This will partially result in a AU$282 million impact on the bank’s cash earnings after tax for the 1H21, it said.
Other items impacting the bank include AU$220 million in customer refunds, litigation provisions, and payments associated costs, as well as AU$56 million in costs associated with ending the group’s relationship with IOOF.
According to the bank, the loss, however, will be partially offset by its investment gains in Coinbase, a San Francisco-based online platform for buying, selling, transferring, and storing digital currency, and Zip Co that are expected to deliver around AU$288 million and AU$18 million, respectively.
For the 2020 full year, Westpac reported a 66% profit drop posting AU$2.29 billion for 2020. Cash earnings came in at AU$2.6 billion, down AU$4.2 billion when compared to the same period last year.
Revenue dropped 2% to just over AU$20 billion.
At the time, the company attributed the profit drop to COVID-19 and its AU$1.3 billion fine for breaching the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) over 23 million times.
The Australian Transaction Reports and Analysis Centre (Austrac) came to an agreement with Westpac last September to settle the anti-money laundering and counter-terrorism financing allegations that were raised by the watchdog in November 2019.
More from Westpac
Westpac to block abuse from money transfers
Customers not acting in line with Westpac’s policy for acceptable behaviour will be warned and if necessary, exited from the bank.
Westpac signs SocietyOne as next digital bank ‘as-a-service’ partner
Meanwhile, Bank of Queensland goes after Big Four share with AU$1.33 billion ME Bank purchase
Westpac brings Afterpay on as first digital ‘bank-as-a-service’ platform partner
Afterpay will soon be offering Westpac products and tools to its customers under the deal.
Westpac to bring 1,000 call centre jobs back to Australia
The bank promises that customer calls will now be answered by someone in Australia.
