(Reuters) - Westpac Banking Corp <WBC.AX> said on Thursday its annual cash earnings will fall by about A$235 million ($169.9 million) on account of provisions for customer refunds and litigation, amid damaging revelations from an inquiry into the financial sector.
About two thirds of the impact is expected to be recorded as negative revenue while the remainder will be recorded in costs, Australia's second-largest lender said in a statement.
"It is disappointing some of our past practices have not lived up to appropriate standards," said Chief Executive Brian Hartzer.
Westpac's shares closed down 0.7 percent.
Earlier this month, the bank agreed to pay a record A$35 million ($25.31 million) fine for wrongly approving thousands of mortgages.
Westpac said costs associated with responding to the ongoing Royal Commission, as the inquiry is called, were not included in these amounts.
Bell Potter Securities cut its valuation of Westpac stock by 3 percent to A$29.75 from A$30.60 and downgraded its recommendation to 'hold' on expectations of cash earnings falling 3 percent this year and 1 percent in 2019.
"Because potential costs associated with responding to the Royal Commission and work in respect of other advice fees are not included in the charge, we feel a Hold rating ... is more prudent this time."
Westpac said reviews that include potential further costs related to advice fees charged by aligned planners would continue into 2019.
The bank is scheduled to report full-year earnings on Nov. 5.
(Reporting by Aditya Soni in BENGALURU; Additional reporting by Paulina Duran in SYDNEY and Melanie Burton in MELBOURNE; Editing by Stephen Coates and Christopher Cushing)
