Westpac has joined ANZ in deferring its interim dividend, as its profits slumped 62 per cent due to the impact of provisions for future coronavirus-related losses and a large AUSTRAC money laundering penalty.

Despite a 6 per cent rise in revenue over the first half to $10.6 billion, more than $3 billion in provisions to cover potential losses and costs dragged net profit down to $1.19 billion.

Those impairment charges included $2.24 billion for likely loan losses, most of which related to the severe economic downturn due to COVID-19.

In addition, Westpac has set aside more than a billion dollars to cover potential legal costs and penalties for breaching anti-money laundering laws in a case being brought by financial crimes regulator AUSTRAC, while also setting aside $258 million for customer remediation and associated costs.

Following the example of ANZ last Thursday — and defying NAB's decision to pay a dividend, albeit reduced — Westpac announced it would defer a decision on a half-year payout to shareholders.

Gloomy economic outlook

Westpac chief executive Peter King, who is a veteran with the bank but new to the top job, says the economic environment is simply too uncertain at this stage for the bank to pay out money.

"Australia still faces a sharp economic contraction in 2020, with a solid rebound not expected until the December quarter," he said in a statement.

"Business and consumer confidence have fallen sharply. A sustained recovery cannot be expected until the December quarter, although we expect caution to prevail well into 2021."

The bank expects annual economic output to decline by a peak of 8.2 per cent by the September quarter, with a 5 per cent decline overall for 2020 compared to 2019 and a 4 per cent recovery in 2020, which will not make up for all the lost ground.

That gloomy outlook corresponds with ANZ chief executive Shayne Elliott, who expects the unemployment rate to take up to five years to fall back to pre-COVID-19 levels of around 5 per cent.

Westpac expects that to feed through to property prices and is currently forecasting a 15 per cent national home price decline this year with a further 5 per cent next year.

"House prices are expected to fall through the remainder of 2020, reversing the recent recoveries, particularly in Sydney and Melbourne," Mr King said.

However the latest CoreLogic figures for April, released on Friday, showed those falls were yet to commence.

Bank grants relief on $47b of loans

Westpac has revealed that 105,000 customers have so far deferred repayments on $39 billion worth of home loans, which is 7 per cent of the bank's mortgage customers.

Two-thirds of those are owner-occupiers, with the other third investors.

Westpac has also granted relief packages to 31,000 business customers on $8 billion worth of loans.

However, Mr King did express hope China's success in containing the virus domestically would support many Australian industries.

"While the rest of the world is also facing significant economic disruption, Australia's exports will likely benefit from the recovery in the Chinese economy," he said.

"Unfortunately ongoing international travel restrictions will continue to flatten inbound tourism and impact foreign student arrivals."

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