Westpac has joined rivals ANZ and NAB in not inflicting direct financial pain on shareholders as a result of the impact from the banking and finance royal commission by leaving final and full year dividends unchanged.
The country’s second-biggest bank said this morning that it would pay an unchanged final of 94 cents a share making for a steady $1.88 cents full-year payout to shareholders.
The dividend came decision came after the bank declared a steady cash profit for 2017-18 of $8.065 billion and a 1% rise in the statutory result to $8.095 billion. That was struck on revenue of $22.18 billion for the year, up 2%.
The best sign of the bank’s strength was a 2 points rise in its net interest margin to 2.01% (a one-point rise to 2% excluding its treasury operations).
Westpac CEO, Brian Hartzer said in a release with the results:
“While the economic environment remains supportive, this result reflects the tough operating conditions for banks, with higher regulatory, compliance, and funding costs, and increased competitive pressure, particularly in the second half. In addition, provisions for customer refunds and related costs, along with legal costs, were $281 million after tax (equivalent to 3.5% of cash earnings) as we continued to work through regulatory investigations, remediations, and putting things right for customers.
“In response to these challenges, we’ve lifted productivity savings 16% to $304 million over the year.
“While earnings were flat, our balance sheet remains strong across all dimensions of asset quality, capital, and liquidity. We have also made substantial progress on our service-led strategy and digital transformation program.
“Westpac’s mortgage book remains fundamentally sound, with around 70% of Australian customers ahead on repayments and 90-day delinquencies remaining low.
“Results for the Business Bank and New Zealand divisions were the standout. The Business Bank delivered cash earnings growth of 8% supported by good growth in the small business sector and declining impairment charges. New Zealand’s result benefited from the completion of a two-year restructuring program, with cash earnings up 5% (NZD). WIB maintained good discipline on margin and costs, but cash earnings were down 6% mainly due to lower markets income.
“Elsewhere, conditions were more difficult. Provisions for customer refunds were higher for BT Financial Group, and the Consumer division experienced both increased funding costs and higher remediation costs.”
On the royal commission, the Westpac CEO said Westpac continues to focus on addressing issues that have been highlighted during the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.
“We remain committed to getting things right for our customers and have made good progress on implementing the ABA’s Six Point Plan. We have reinforced our values and service culture to all employees through additional training, introduced the Sedgwick remuneration recommendations for employees two years earlier than required, removed grandfathered commission payments for our salaried financial planners, and launched a simpler and more transparent pricing structure for BT’s investment platform, Panorama.
“Importantly, our new Customer and Corporate Relations division has been established to oversee complaints handling across the Group, and to improve the way we deal with customer issues, building on the important role of our Customer Advocate,” Mr. Hartzer said.
