Westpac has followed the lead set by ANZ and NAB and defer its interim dividend after profits collapsed under the weight of coronavirus provisions.

Measures taken to shore up the bank against potential losses and costs brought on by the disease totalled $3 billion and dragged the company’s half-year net profit to $1.19 billion.

That figure is down 62 per cent on the same period last year, and comes despite a 6 per cent increase in revenue to $10.6 billion during those 6 months.

The bank also set aside $900 million to pay potential penalty fees after AUSTRAC accused Westpac of 23 million breaches of anti-money laundering laws.

Westpac chose to defer its interim dividend payments as a result. 

In 2019, the bank paid a fully franked interim dividend of 94 cents a share.

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Westpac chief executive Peter King said the results were “the most difficult” the bank has seen in years.

“It is significantly impacted by higher impairment charges due to COVID-19, as well as notable items including the AUSTRAC provision,” he said in a statement.

“In light of the changed economic outlook we have increased Westpac’s provisions for expected credit losses to $5.8 billion, which includes approximately $1.6 billion of additional impairment charges predominantly related to COVID-19 impacts.”

Even so, Mr King reassured investors the bank is still in a strong position and that its liquidity and funding measures remain “comfortably above regulatory requirements”.

“Westpac’s balance sheet remains strong,” he said.

Customer deposits were up $19 billion over the half, more than funding loan growth which increased by $5 billion. The deposit-to-loan ratio is now over 75 per cent.”

Bank dividends take a battering

Westpac’s announcement comes less than a week after rival bank ANZ also deferred its dividend payments after it’s third quarter profits fell by more than half.

NAB – the first of the big four banks to post results this earnings season – cut dividends by almost two-thirds.

Commonwealth Bank has not yet released its results.

The decision to cut or defer dividends has drawn the ire of retiree advocacy group National Seniors Australia, who warned many older Australians rely on those payments for their income.

But the decision was encouraged by banking regulator APRA, who cautioned banks need to keep cash on hand to navigate the uncertain economic climate created by the coronavirus.

APRA’s comments echoed similar remarks made by regulators around the world, including in New Zealand, the UK, and Europe where regulators have suspended dividend payments.

-with AAP