Westpac slipped out a first-quarter trading update yesterday that revealed a 6.8% rise in cash earnings to just over $2 billion.
The result was hard to assess properly because Westpac compared it to the final quarter of 2018 and not the first quarter of the same financial year.
The country’s second-largest bank reported unaudited cash earnings in the December quarter of $2.04 billion, which compared with a quarterly average of $1.91 billion in the previous six months.
The news though hardly moved Westpac shares which edged up 0.1% to $26.28.
As Westpac’s trading update was being released Bank of Queensland revealed that its first-half earnings would be lower – the news saw the shares drop more than 6% to $9.32 (see story below).
Westpac said that while earnings rose, the previous half had been hit down by compensation costs. Before remediation costs, profits in the second half of 2018 would have been $2.05 billion, slightly more than in the most recent quarter.
After Westpac led the Commonwealth, ANZ and other banks in raising home loan rates last September (but not the NAB whose only lifted its rates earlier this year) the bank said yesterday its net interest margins were “higher”, it said, excluding its treasury and markets division.
The bank said the contributions of its treasury and markets divisions were weaker, due to trading conditions. Expenses were also lower in the quarter.
It said stressed loans, as a proportion of its total book, were “little changed” over the quarter and there were no new individual loans of more than $10 million that became impaired.
Westpac said there were no “material” customer remediation charges booked in the quarter, but additional charges were likely in the next quarter.
Westpac also had higher costs from recent natural disasters that have hit insurance companies recently. That saw the quarter include $30 million in claims from the Sydney hailstorm in late December and $35 million in claims expected from this month’s flooding in Townsville and other parts of northern Queensland.
Westpac will deliver its half-year earnings in May.
Meanwhile, Bank of Queensland says it expects its earnings for the half-year to be down 6% to 9% when it releases them in April.
The bank told the ASX yesterday that based on current performance, it was on track to make $165 million to $170 million in the half, compared with $182 million last year.
Most of the decrease “is due to continued downward pressure across fee, trading, insurance and other income lines,” Bank of Queensland said.
“Looking forward to the second half, market conditions are expected to remain challenging.”
The bank expects to face increased costs complying with regulatory requirements and expectations from the financial services royal commission.
Bank of Queensland releases its February 28 first-half results on April 11.
So far the CBA and the NAB have revealed lower profits for the six months to December and the three months to December respectively, Macquarie has revealed a 15% profit rise forecast for the year to March 31, and the Bendigo and Adelaide Bank’s first-half result was weaker as well, to go with the drop in the forecast from Bank of Qld.
Westpac’s results are not strictly comparable because the performance was against the “quarterly average of Second Half 2018 of $1.91 billion” as opposed to the same period in the prior financial year.
