Westpac (WBC) has joined rivals NAB and ANZ in reporting a modest rise in cash earnings for the six months to March 31, and left interim dividend on hold as the bank assesses the need for more capital over the next year.
The bank this morning reported a 3% rise in cash earnings to just over $4 billion, on a 3% rise in revenue to $10.27 billion. Statutory net profit rose 6% to just over $3.9 billion.
Helping the improved bottom line was a 26% slide in impairment charges, or $174 million to $493 million in the March half year as credit quality improved, especially among corporate clients in troubled sectors such as the resources sector.
Interim payout was unchanged at 94 cents a share. Like the others, Westpac is awaiting news from regulators about how much extra capital they will need to hold (more than $4 billion each is the latest estimate) to increase their buffers in the event of a big credit crisis, – say in housing.
The bank’s net interest margin fell by 7 points to 2.05%, down 4 points from the first half a year ago and down 7 points from the 2.11% rate in the second half of 2015-16. CEO Brian Hartzer said in this morning’s statement that it was “a solid result given the current complex operating environment."
“We have been disciplined in balancing growth and returns, with cash earnings up 3% over both the previous half and the same period last year. At 14%, our return on equity is at the upper end of the range we are seeking to achieve, and we held costs flat over the last six months.
“Our portfolio of businesses has performed well. The Institutional Bank is the standout, benefiting from improved credit quality, increased customer transactions, and a strong result from our markets business. Our Consumer and Business Banks continued to grow in targeted areas but margins were affected by higher funding costs.
“The benefits of our strategy are also clear in this result. We’ve digitised more processes, which is improving service for customers while also bringing costs down. We’ve launched a number of new systems including Samsung Pay, SuperCheck, and our new wealth system Panorama; and we’ve added around 100 new online features to assist customers.”
Looking to the rest of the year and into the next, Hr Hartzer said in the statement that
“Westpac’s consistent focus on Australia and New Zealand over a long period means our high quality portfolio is strongly positioned. “We remain positive about the Australian housing market, although we expect price growth to moderate through 2017. 90+ day delinquencies remain low by historical measures and our home loan book continues to perform well with more than 70% of customers ahead on their repayments.
“2017 financial system credit is expected to grow at around 5.5%. Housing credit growth is likely to ease a little as demand slows.
“The financial services industry continues to experience significant regulatory change. Given the strength of our business and our balance sheet, we are well placed to respond to any additional regulatory requirements.
