Like rivals NAB and ANZ, Westpac is leaving its interim dividend unchanged after a modest rise in earnings for the six months to March 31.
Like NAB and especially the ANZ, Westpac saw a fall in its bad loan impairment charge that was enough to push earnings higher.
Adding to that was a sharp 9 point rise in the net interest margin to 2,05%. NAB lifted its margin 5 point to 1.87%, despite a rise restructuring costs but the ANZ saw its margin fall 7 points to 1.93% thanks to the impact of ongoing assets sales and restructuring.
Westpac said Monday morning that interim payout for remain at 94 cents a share after lifting cash earnings by 6% to $4.25 billion for the March half year.
Westpac shares rose 0.8% to $29.34 after being up by more than 1.6% earlier in the day.
Revenue rose 4% higher to $11.15 billion and operating expenses rose just 1% to $4.65 billion.
Statutory after tax profit was up 7% to $4.2 billion
The net interest margin improved by 9 basis points to 2.05% (2.17% including treasury).
Westpac’s impairment charge fell 20% to $393 million, or 11 basis points of gross loans.
The cost to income ratio fell 9 points as well to 41.7%.
The improvements in those three measures tells us why Westpac’s earnings rose.
CEO Brian Hartzer described the result as “good quality” built on consistent performance and a disciplined approach to growth and returns.
“Our businesses continue to perform solidly, with the results for the Consumer and Business banks particularly good,” Hartzer said in Monday’s statement.
“All businesses increased core earnings over the prior half. We are pleased that there were no one-offs, making it a clean result.”
Hartzer says headwinds to the growth outlook include higher funding costs and increased scrutiny on the banking industry.
However, he said there are “opportunities to grow” and the economy is “fundamentally sound”.
Hartzer acknowledged what he called the “significant customer and community concerns” raised by the financial services Royal Commission, currently investigating a series of scandals involving the major banks and the AMP.
He sees the process provides a critical opportunity to restore customer trust across the sector and claimed Westpac is already well advanced in taking steps that will improve customer outcomes,” he says.
“We have been actively seeking out instances where we’ve got it wrong, and in those cases, putting it right for the customers affected.
Cash earnings at BT Financial Group, where the bank’s financial planners sit (and where many of the complaints are located) were up 7% to $404 million.
Mr Hartzer said the bank believed the Australian economy would growth near its long-term average pace of about 2.7% for the rest of this year and next. That’s weaker than the 3% to 3.25% the Reserve Bank believes and what will be in Tuesday night’s Federal Budget.
But he said that with household income growth "lacklustre" and low levels of inflation, the Reserve Bank was likely to leave official interest rates on hold "for some time".
