Cyber glitch costs Westpac $40 milliongreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Cyber glitch costs Westpac $40 million By TIM BOREHAM 09aug01
A DODGY computer system within Westpac's consumer finance arm AGC has cost the bank $40 million in bad debts.
In a surprise disclosure, the bank yesterday revealed the computer had failed to notify the bank of debtors making late repayments.
Given the unsecured nature of AGC's lending, the delay made recovery impossible.
Westpac spokesman David Lording described the loss as a one-off event and said the programming glitch was being fixed.
"When an account goes into delinquency you want to be notified as soon as possible," he said. "We had some system failures in this regard."
While the $40 million loss will be written off against Westpac's full-year profits, the bank confirmed its full-year profit would still be in line with the market's estimate of $1.8 billion to $1.9 billion.
Overall, strong revenue growth would be "largely offset" by higher bad debt charges in the consumer and business lending books, Westpac said. "Core revenue growth remains strong and is currently tracking above planned levels.
"Revenue growth is also boosted by the recent sale of (the bank's) wholesale currency services to American Express, expected to result in a post-tax contribution of about $28 million."
Overall, the bank said, the expected rise in bad debts resulted from both higher loan growth and corporate failures.
Westpac is known to be a creditor to the troubled Pasminco and PMP and was exposed to the collapsed HIH Insurances.
"But we do not have any systemic issues in the corporate book," Mr Lording said.
According to a Salomon Smith Barney report, Westpac has increased its lending market share by backing away from the conservative stance stemming from its "near death experience" of the early 1990s.
"Previously a laggard with declining market share, Westpac's decision to no longer pass up moderate-risk, quality commercial lending opportunities is helping boost its loan market share," the report says.
Westpac, a September 30 balancing company, does not report its full-year results until November.
Chief executive David Morgan will host a briefing next Monday.
Westpac shares closed steady at $14.45.
-- Martin Thompson (firstname.lastname@example.org), August 12, 2001