Westpac is paying an interim dividend of 58 cents a share after revealing a solid rebound in earnings for the six months to March 31 from the depressed 2019-20 year.
The country’s second biggest bank reported cash earnings of $3.53 billion, up 256% on the first half last year, as the economy continues to improve from the depths of the Covid lockdowns in 2020.
Statutory profit was up 189% at $3.44 billion.
Cash earnings were higher than market forecasts as was the interim dividend of 58 cents a share.
The pandemic and lockdowns saw Westpac defer its first half dividend in 2020 before deciding not to pay one.
Westpac’s results release starts the usual week of interim (and a final) from some of the big banks. ANZ is next on Wednesday, then NAB on Thursday before Macquarie releases its final on Friday.
Westpac said it expected to invest between $3.5 billion and $4 billion over the next three years as it seeks to recover lost ground after its problems with money laundering and other cultural problems that saw the board and senior management revamped.
Westpac said it would target an $8 billion cost base by the 2023-24 financial year, with more digitisation and simplification.
This means more branch closures and staff cuts as a consequence.
The bank recognised an impairment benefit of $372 million (revealed last week). It’s net interest margin expanded over the past six months to 2.09%, but that was down 4 points over the past year.
In a statement to the ASX, Westpac Group CEO Peter King said: “It has been a promising start to the year with increased cash earnings, growth in mortgages and continued balance sheet strength.
“First half earnings were considerably higher than the prior corresponding period, mainly due to an impairment benefit reflecting improved asset quality and a better economic outlook.
“Notable items were also lower. We improved balance sheet strength, with our Common Equity Tier 1 capital ratio rising 153 basis points to 12.34 per cent.
“Importantly, we are beginning to see the benefits of our new operating model through improved performance.
“Our Australian mortgage book increased $2.6 billion over the past six months, with good growth in owner occupier loans partly offset by lower investor lending. Owner occupier loans increased 3 per cent, with first home buyers making up 13 per cent of new loans.
“We also managed margins well, with the margin up six basis points from Second Half 2020,” he said.
“Australia and New Zealand have managed the pandemic well and we are proud to have helped so many customers return to full repayments. Stressed exposures to total committed exposures ended the half at 1.60 per cent, compared to 1.91 per cent at 30 September 2020.
“While the economic outlook is more positive, there is still some uncertainty and we have remained prudent in our impairment provisioning,” Mr King said.
