Westpac delivers solid profit on par with previous half
(5 May 2015 – Australia) Westpac’s retail and business banking divisions performed well in the first half of 2015, with the Group reporting first half cash earnings of A$3.778 billion and statutory net profit of A$3.609 billion.
The result was flat on the prior corresponding period which Westpac put down to a lower Treasury contribution and a A$85 million (post-tax) charge following the introduction of the methodology changes to derivative valuations.
Lending was up 7 percent, customer deposits up 8 percent, funds under management were up by 25 percent and funds under administration increased 17 percent.
The expense to income ratio was at 42.5 percent from 41.2 percent and Westpac said there were further improvements in asset quality with impaired assets as a percentage of gross loans falling 16 basis points to 0.35 percent.
The bank’s retail and business banking’s focus on investing in front-line customer initiatives paid off, contributing to an 8 percent uplift in cash earnings to A$1.350 billion.
Meanwhile St. George Banking Group delivered cash earnings of A$837 million, up 9 percent and Bank of Melbourne continued to deliver above system lending and deposit growth.
BT Financial Group’s cash earnings increased 2 percent, but the higher funds management earnings, which were up 10 percent were offset by weaker insurance earnings which were down 13 percent.
Westpac Institutional Bank reported cash earnings of A$624 million, down A$126 million (17 percent) which the bank attributed to derivative adjustments equivalent to A$122 million (pre-tax), $68 million lower impairment benefits over the period, and competition driving down margins.
The bank’s New Zealand arm had a 2 percent increase in cash earnings to NZ$441 million (A$395 million), with 7 percent growth in core earnings on the back of solid loan growth and stable margins.
Lending increased 5 percent with mortgages up 5 percent, while deposits increased 6 percent.
Westpac Pacific cash earnings were down A$6 million, negatively affected by foreign exchange controls in Papua New Guinea.
Westpac Group chief executive Brian Hartzer said he was positive about the growth outlook for the Australian economy, with low interest rates, a lower Australian dollar and support from the housing sector.
"While I'm positive about the outlook, the economy is currently in transition and this means that we expect growth to be uneven across different industry sectors and geographies.
"Areas like housing, infrastructure, and agriculture will do relatively well, while other areas such as mining and resource-driven regions and adjacent service providers will find it tough.
"For Australian banks, this means that credit growth will be modest but positive with housing growing faster than business. Asset quality should remain strong, supported by low interest rates and healthy business balance sheets.
"This also means that banking competition will remain intense, including from new entrants.
"In this environment, and with considerable regulatory uncertainty, we will continue to run our businesses in a way that provides the headroom to manage volatility, while investing in our people and technology to build the value of the company,” Hartzer said.
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