ANZ has flagged an $824 million hit to its full-year profit due to impairments and one-off expenses, more than half of it related to customer remediation.
The lender, which will announce its results on October 31, says the $421 million in post-tax remediation costs covers customers charged fees for no service, inappropriate financial advice and other issues uncovered from product reviews.
“These relate to issues that have been identified from reviews to date,” ANZ said in a statement.
“These reviews remain ongoing.”
ANZ’s remediation includes $127 million for businesses recently sold to IOOF, while other items include $159 million in restructuring costs and $38 million in royal commission legal costs.
The unaudited hit flagged on Monday is weighted toward the second half, with $711 million in newly announced items to be recorded in the six months to September 30.
The one-off items announced on Monday represent a “welcome” clean-up, according to UBS analysts, who nonetheless warned of more charges to come.
“As has been seen both in Australia and overseas, customer compensation is very difficult to estimate and costs have a tendency to escalate over time,” they said in a note.
“Further, we believe the Australian banks potentially face substantial risk from responsible lending and mortgage mis-selling, with risks rising the further the housing market deteriorates.”
UBS made similar pessimistic noises after rival Westpac last month already warned its full-year cash earnings would take a $235 million hit due to a provision for customer compensation and litigation.
ANZ shares were 2.9 per cent lower with 55 minutes of trade remaining on Monday, dragging the whole financial sector lower and making them the worst performing among those of the big banks.
They were down 81 cents at $26.91 at 1505 AEDT.