Westpac said total technology investment expenses are expected to be higher in full year 2016 cash earnings, in a market update on Tuesday.
The update comes after the bank completed an accounting review, which will see a few changes made and applied to the group's investment spending. These accounting changes include directly expensing more project costs compared to recent years; moving to an accelerate amortisation methodology for capitalised software assets, impacting most existing assets with a life greater than three years; and writing off capitalised cost of regulatory programs, where regulatory requirements have changed.
In addition, the bank's balance sheet will also be impacted by these changes. Westpac said it will see a reduction in capitalised software balance of AU$505 million pre-tax, which was reported as an expense in Westpac's full-year 2015 statutory results. But this will exclude cash earnings, Westpac said.
In September, the bank announced it will be bumping its annual investment spending up 20 percent to AU$1.3 billion as part of ongoing plans to use technology to grow its business. As part of that, the bank also announced it wants to reduce the group's expense growth run-rate to 2 to 3 percent per annum.
During its half year results, Westpac reported that total investment spend reached AU$458 million, with technology programs accounting for 25 percent of the spend and productivity programs making up 51 percent.
Westpac is scheduled to announce FY15 earnings on November 2, 2015, and has revealed that it will be reporting "some large infrequent items" that are to be excluded from the calculation and cash earnings.
"These include the gain on the partial sale of Westpac's holding in BTIM of AU$665 million post tax, and the AU$354 million post tax impact of the reduction to capitalised software balances outline," it said.
Last week, the company launched Wonder, a platform that uses customer information to deliver tailored information in real-time to home buying customers. This added to a string of other investment commitments the company had made during the year, such as investing AU$40 million on top of the AU$23 million it has invested into upgrading its regional and rural branches in Australia.