Potential remediation costs

This week the NAB announced a further $749m to compensate customers for misconduct. Takes their total to $1.1b

This was predicted by Macquarie from their research published in january as shown in the table below.


So they have been spot on so far with NAB.

IFLs current provision is $5-10m relating to deceased estate and product issues identified in the RC. In terms of advice issues and potential remediation they state on pg9 of their half year investor presentation "Working to quantify potential exposure by undertaking a comprehensive review" and that this review to be completed by 30 sept 2019.

"Macquarie has $300 million in additional costs incorporated in its current valuation of IOOF, but believes the total cost could end up in excess of $600 million"
https://mobile.abc.net.au/news/2019-01-26/wealth-manager-remediation-costs-set-to-soar/10749810

IFLs net profit averaged about $128m over the last 5 years. So the costs Macquarie is penciling in ($300-600m) are enormous in comparison to the banks by proportion of earnings.

With renewal in the board and soon management, that 30 sept review date getting nearer, and as other wealth managers gradually fess up to their true compensation bills, the chances are the compensation bill will become material and suppress earnings for some time. I also note the level of shorts are building towards 10% again.

I'm considering lightening my holdings in light of the above.

Any counter thoughts/views?