UPDATE 2-Westpac’s Coinbase windfall fails to offset $218.4 mln hit to profit

(Rewrites with details of gains on Coinbase, Zip exposure)

April 26 (Reuters) – Westpac Banking Corp said on Monday one-off gains from its exposure to a U.S. cryptocurrency exchange and a buy-now-pay-later firm failed to offset a hit to first-half cash earnings from customer refunds and write-downs.

Australia’s second-largest bank is set to report its first-half results on May 3, with earnings slated to be A$282 million ($218.38 million) lower.

Westpac, through its venture capital arm Reinventure, booked a net A$288 million gain on its investment in Coinbase Global , which recently listed in the United States just as cryptocurrencies are slowly gaining greater mainstream acceptance.

Since the listing on April 14, Westpac has slashed its exposure to Coinbase by 50%. It had 1.2 million shares of the exchange.

The lender also gained A$18 million from selling its stake in Zip Co Ltd, Australia’s No.2 buy-now-pay-later firm.

The windfalls, however, were not enough to offset around A$220 million in additional provisions for customer refunds, payments and litigation.

A loss of A$113 million from the sale of its pacific business, software and goodwill write-downs of roughly A$200 million and A$56 million from costs to end its relationship with IOOF Holdings will also weigh on the lender’s profit.

Westpac posted interim cash earnings of A$993 million last year after taking large write-downs, mainly to account for expected loan losses from the COVID-19 crisis, while also opting to not pay a dividend.

The lender has been selling non-core assets and looking to turn the page on the reputational hit it took for enabling millions of illicit payments, including to people exploiting children, that resulted in a record A$1.3 billion fine.

Shares of Westpac rose half a percent amid wider gains in the market. They have surged 30% this year, outperforming Australia’s other three major banks.

($1 = 1.2913 Australian dollars) (Reporting by Nikhil Kurian Nainan in Bengaluru; editing by Diane Craft and Krishna Chandra Eluri)