ANZ shares: $559 million in remediation costs announced

The announcement at a glance

It hasn’t been a good week for Australian banks, that’s for sure.

As a rate cut weighs on lending margins and as Australia’s Treasurer hits out against the big four, ANZ (ASX: ANZ) has today announced A$559 million in after tax customer remediation costs.

ANZ looks to be playing follow the leader with NAB, which just last week announced A$1.2 billion worth of customer remediation and software capitalisation costs.

In response to today's announcement, the ANZ share price traded flat, reaching A$27.32 per share by 11:39 AEST.

ANZ share price: costs, costs, costs

ANZ divided today’s remediation bill into continuing and discontinued operations.

From continuing operations, ANZ has flagged after-tax costs of A$405 million – set to be recognised in 2H19. On this front, the bank noted that such costs are 'largely related to product reviews in Australia Retail & Commercial for fee and interest calculation related matters.'

The bank further commented that:

‘These include historical matters recently identified during the period, as well as refinements to estimates of existing customer compensation programs and associated costs.'

Speaking to costs associated with discontinued operations, ANZ flagged after-tax costs of A$154 million – also set to be recognised in the second half of 2019. According to the bank, these costs were 'primarily associated with the advice remediation program and customer compensation chargers for other Wealth products.'

All up, this means A$559 million in customer remediation costs are set to be recognised in the second half of 2019.

Speaking of today’s media release, ANZ's Chief Financial Officer, Michelle Jablko said:

'We recognise the impact this has on both customers and shareholders. We are well progressed in fixing issues and have a dedicated team of more than 500 specialists working hard to get any money owed back to customers as quickly as possible.'

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Final thoughts

Prior to today’s announcement, the bank had already made a A$928 million (pre-tax) provision for remediation issues.

ANZ is set to unveil its 2019 full-year results on October 31.

Heading into these annual results, analysts remain ‘overweight’ on ANZ – according to the Wall Street Journal. Overall, the bank has four buy ratings, seven hold ratings and one sell rating.

Year-to-date, the ANZ share price has risen a little over 14%.

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