Westpac’s first-half cash profit drops to $3.1 billion

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Westpac reported a 12% decline in first-half cash earnings to $3.1 billion, due to competitive pressures in the home loan market and higher provisions for bad debts.

Australia’s second-biggest bank by market value said statutory net profit for the six months to March 31 also fell 5% from a year ago to $3.28 billion. of dollars.

Half-year revenue fell 4% to $10.23 billion.

Westpac Chief executive Peter King said this morning the drop in profits was ‘mainly due to competitive pressures on net interest margins and the return to an impairment charge after having benefits last year’ .

Still, asset quality has improved and most credit quality measures have returned to pre-COVID levels, he said.

The lender, however, increased provisions to account for supply chain issues, inflation, higher interest rate expectations and recent flooding.

Westpac said its cost reset program helped offset lower revenue and higher depreciation, with costs down 10% from the same period a year ago.

Unlike Big Four rivals ANZ and NAB, Westpac is also sticking to its cost reduction target of $8 billion by FY2024.

Profits at its main consumer division, which includes the mortgage business, fell 15% from a year earlier. Margins fell by 25 basis points in a context of strong competition in the mortgage market and low rates.

As a result, net interest margins, which reflect the difference between what banks charge and the cost of a loan, slipped 22 basis points to 1.85%.

Go forward, Westpac forecasts the economy to grow 4.5% in 2022 but slow to 2.5% in 2023. Credit growth is expected to reach 5.7% in 2022.

Housing demand has already shown signs of slowing, and rising interest rates should help moderate house prices next year.

“Consumer spending may be tempered by higher prices and higher interest rates,” King said.

“However, the positive aspects of strong household and business balance sheets, combined with the continued reopening of international borders and local economies, will likely increase economic activity.”

Westpac will pay a fully franked interim dividend of 61 cents per share, up from 60 cents a year ago.

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