AAP Finance

Westpac survives board spill despite anger

By AAP Newswire

Westpac has been handed a second strike on executive pay but dodged a potential board spill despite shareholders roasting the bank over its child exploitation scandal.

Outgoing chairman Lindsay Maxsted faced more than five hours of questioning at a marathon annual general meeting on Thursday, with shareholders demanding to know how Australia's second largest bank will atone for allegedly allowing money transfers that could be linked to child abuse in Asia.

One shareholder called the board "at best incompetent and negligent, and at worst complicit and culpable", while others demanded further accountability beyond the departure of Mr Maxsted and chief executive Brian Hartzer.

"You should go now, you should all go," one shareholder said to applause.

"But before you do, you should hand back your fees."

But while more than 35 per cent of proxies voted against the company's remuneration report - eclipsing the 25 per cent needed for a second strike - a motion on whether to hold a spill meeting was defeated by more than 91 per cent of shareholders.

Investor groups had before the meeting signalled a desire to maintain stability at an institution that has lost its CEO and is preparing for the departures of Mr Maxsted and risk and compliance committee chair Ewan Crouch.

Director Peter Marriott was re-elected to the board despite a significant 41.4 per cent of proxies protesting against his appointment.

Mr Marriott had been the target of shareholder ire on account of his place on the risk and compliance committee and tenure that began in 2013.

Steven Harker, Margaret Seal, and Nerida Caesar also retained their board positions, though the latter copped a 25 per cent protest vote against her re-election.

Mr Maxsted admitted the scandal-hit bank did not act quickly enough to implement "robust" monitoring of money transfers potentially linked to child abuse but said the remuneration adjustments made to date were adequate.

"The whole remuneration piece for 2020 will be judged by the board going through 2020," Mr Maxsted told shareholders in Sydney on Thursday.

"I do think that what we have don so far with regards to remuneration has been adequate, but I understand you might not agree, and other people here might not agree."

The chairman has also defended the final pay packet of Mr Hartzer, stating the $2.7 million fixed income to the end of his 12-month notice period was not "overly generous".

The board has scrapped 2019 short-term bonuses for executives and several members of the general management team, subject to the outcome of an external investigation into the AUSTRAC allegations.

Mr Maxsted told his final AGM meeting as chairman that, while Westpac identified and filed suspicious matter reports on the customers whose transfers led to legal action by the financial crimes regulator, the bank was too slow to act.

"We should have implemented more robust transaction monitoring earlier than we did," Mr Maxsted said

"This would have generated more suspicious matter reports to AUSTRAC."

The bank faces potentially billions in fines over allegations it breached money laundering laws 23 million times and failed to properly monitor payments potentially linked to child sex offences in south east Asia.

The alleged breaches led Westpac to shut down international transfer platform LitePay, with IBM Company Promontory appointed to head the bank's accountability and financial crime program review.

The bank's response plan is expected to lead to $80 million in FY20 pre-tax expenses.

Customer remediation in the wake of the financial services royal commission and exiting advice business already reduced cash earnings by around 15 per cent - or $1.1 billion - in FY19 and the bank cut its final dividend.

Peter King, who was appointed acting CEO when Mr Hartzer departed two weeks ago, said the low growth environment, the threat of even lower interest rates and regulatory challenges are likely to persist in FY20.

Shares in the bank closed 1.23 per cent lower at $24.08 and have slipped 9.3 per cent since the AUSTRAC allegations were aired last month.

That's wiped about $8.89 billion from the company's market capitalisation.

In another blow for the bank, the federal government has not included Westpac in the initial tranche of banks servicing its $500 million first home loans scheme.

NAB and Commonwealth Bank have been confirmed as participants alongside 25 other smaller firms.