Like St George the day before, record result from Westpac lit a fire under banking stocks for a second day in a row.
Westpac, which is the best performing bank stock this year, outperforming the overall market (like BHP and RIO) said its full-year profit climbed to a record on rising credit growth and higher inflows to its managed funds.
Cash profit of $3.507, a record and 14% up on a year earlier.
Westpac joined the ANZ and St. George Bank in posting record profit as demand for loans from companies, especially from business, has hit the fastest pace since 1989 when the property bubble was in full cry. That ended with the 'recession we had to have' and the near collapse and bailout of Westpac.
Westpac shares jumped to close at a record $31.06, up 52c, the NAB rose 40c to $43.50, the CBA moved up 15c to $61.65, St George continued its strong gains with a 75c rise to $37.10 and the ANZ brought up the rear rising 32c to $30.42.
ANZ reported record earnings a week ago and on Wednesday, St George repeated the dose, and Westpac made its contribution to the cascade of banking profits.
The ANZ is in a sort of earnings watch from investors as they wonder about the quality of the new CEO, but at Westpac there are no such worries as David Morgan prepares to leave. His replacement, Gail Kelly, has the confidence of the market because the record St George result was her work.
So forget all those worries expressed last week about the sharp rise in ANZ's impaired loans provisions: they were signalled, but focus on the way revenue is growing, and that the banks are making huge profits.
Even though they have had some tough times in the last two months of the year in August and September, and got caught with expensive off balance sheet funding vehicles, our big banks have shrugged off all the woes of the subprime crisis and the credit freeze.
The NAB is due to report next Friday and is expected to report its best profit performance for five years as it finally shakes off the woes from the forex trading and boardroom debacles.
The only possible risk is the impact of the credit freeze on its British banking business where there was that nasty run on the Northern Rock bank and where the freeze had a much more dramatic impact.
Interest rates will rise next week and Westpac CEO, David Morgan, believes there could be two moves, with the first next week.
Westpac said it had a 12.4% rise in annual cash profit to a record $3.507 billion for the year ended September 30.
The ANZ said cash net profit rose 9.4% to a record $3.924 million and yesterday St George said its earnings rose 11% to $1.16 billion, also a record.
St George Lifted revenue just under 11%, the ANZ by 10% and Westpac by 10.4%, all above forecast and above the growth in the overall banking system.
Dr Morgan finished his career with the best result the bank has seen, especially since he was part of the senior management team during the dark days in the early 1990s when the bank came close to collapse but was saved by the AMP, which took an interest, and by a $1.5 billion rights issue fully underwritten by Credit Suisse.
That failed but Westpac got the new capital from the investment bank which covered the shortfall, and made an awful lot of money as Westpac rebuilt itself under Bob Joss and then David Morgan.
So it was understandable that he was upbeat yesterday:
"This is a high quality result, led by revenue increasing 11%, the highest for many years," he said.
"We have achieved strong double digit earnings growth of 14% without compromising new business margins or risk settings.
"Importantly, our return on equity of 24% is the highest in Westpac's recent history.
"Importantly, Westpac has no direct sub-prime exposure and our credit quality remains sound, although delinquency levels are moving up from historically low levels."
And Westpac's impairment charge jumped 29% over the year to $482 million but in the second half, the increase was a much slower, just 8% to $250 million. That may moderate any knee jerk response to the full year figure.
That's what knocked the ANZ off course last week: a 39% rise in second half provisions for dud loans, but the market failed to take heed of previous warnings from the former management.
And, if you had to pick a reason why the market is set against the ANZ (although the share price regained the $30 mark yesterday) it's the change of management with the plummy sounding Mike Smith now running the bank and sounding a bit at sea and out of tune with the very successful strategy of his predecessor, John McFarlane
Westpac's cost to income ratio fell by over two percentage points to a record low of 45%, while underlying margins fell eight basis points, in line with medium term expectations.
The bank added 800 employees during the year.
Mortgage lending increased 12%, slightly above system, and deposit volumes rose 11%.
"Looking ahead, the economic environment remains broadly supportive. The Australian economy is expected to remain robust, underpinned by continuing strong demand, both domestically and internationally, and historically low unemployment.
"As a result, demand for credit is expected to remain high with solid housing growth and continuing robust business investment. At the same time, legislative changes to retirement savings have provided a further boost to the wealth industry," Dr Morgan added.
