(6 May 2009 – Australia) While last year’s St George acquisition has given Westpac a boost in revenue, bad debts have hit the bank’s profits, which are down on last year.Westpac recorded statutory net profit for the six months to March 2009 of A$2.175 billion, down by 1.0 percent from the level of A$2.202 billion reported a year earlier.
Despite this, actual revenue grew strongly, from A$5.707 billion last year to A$8.087 billion this year, an increase of nearly 42 percent. The revenue result was primarily pushed up by the acquisition of St George, which saw revenues for the six months at A$1.184 billion.
With St George results included on the comparative pro-forma basis for the six months, total bank revenue was up 15 percent to A$8.307 billion.
The resulting profit results for the bank were pro-forma cash earnings of A$2.295 billion, down six percent on the previous corresponding half.
Like its Big Four peers and despite strong revenue gains, the bank was hit by a large increase in bad debts. Charges for bad and doubtful debts increased to A$1.56 billion from A$433 million a year earlier, partly a result of St George’s loan book.
Chief executive officer, Gail Kelly said that pressure across their business customers and expected growth in consumer stress as unemployment rises would see impairment charges grow over the next 18 months.
Real cash earnings by business unit saw the Institutional business take the biggest hit from bad debts. Despite good revenue growth, the unit recorded a 62 percent drop in cash earnings from A$420 million in the first half of last year to A$158 million this year.
Westpac’s Retail and Business Banking unit managed good cash profit growth, increasing 17 percent from A$843 million to A$990 million. Westpac’s next biggest profit earner was St George, which managed a smaller six percent cash profit growth to A$529 million.
Kelly said that strength resided in the 9 percent increase in lending, 24 percent increase in customer deposits and 24 percent increase in core earnings.
Australian customer deposits were up A$46 billion or 27 percent, ahead of Australian system growth of 17 percent.