Westpac In $336m Write-down

The Age

Saturday October 18, 2008

Vanessa O'Shaughnessy, Investment Reporter

WESTPAC will report $336 million in one-off expenses in a self-imposed spring clean before its proposed merger with St George.

In an announcement before its results, the bank also confirmed that Westpac and its partly owned BT Investment Management had collectively cut about 450 jobs between March and September.

About 300 positions were cut from BT, which like other fund managers has suffered a reduction in funds under management and administration.

Westpac chief financial officer Phil Coffey said that after a review of the books, incomplete projects, software and redundant assets would account for about $210 million of the write-downs.

"One example of this was a project to introduce a new margin-lending system and this project was shelved over the second half following a reassessment of our projects," he said in a telephone briefing yesterday.

The bank's pre-tax expenses will be funded by the partial sale of BT Investment Management and Westpac's gain on Visa's initial public offering.

Those gains, reported in the first half of 2008, provided the Big Four banks with $393 million in pre-tax proceeds.

About $13 million has been spent on the proposed St George merger. Another $113million will be spent on structural changes that Mr Coffey said were independent of, but complementary to, the merger.

However, Mr Coffey said that after the spring clean Westpac would review which items were treated as one-off costs and which would be treated as ordinary expenses or that affected net profit.

When Westpac chief executive Gail Kelly was head of St George, she was queried over St George's treatment of software write-downs, which were often reported as significant items. Analysts said then that the items should have been included in profit and loss as expenses.

Wilson HTM banking analyst Brett Le Mesurier said that whichever way write-downs were treated, they still affected the bottom line.

"The issue is really what profits we have going forward," he said, explaining that it was advantageous for Westpac's future results to write down all non-performing assets at once.

Westpac was the second bank to provide a preview this week. National Australia Bank confirmed its profit outlook on Thursday. NAB, which will report two weeks ahead of schedule on Tuesday, expects to report a full-year cash profit of $3.9 billion, down 11%.

Westpac will announce its full-year results, for November 2007 to September 2008, on October 30. Analysts expect it to increase cash profit by more than 4%, to about $3.7 billion.

KEY POINTS

Westpac confirms that 450 jobs have been axed from the bank and BT.

About $13 million has been spent on the proposed merger with St George.

© 2008 The Age

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