4 May 2001
Continued success in the corporate banking market, increased lending activity in the business and agribusiness markets,
and growth in financial services saw WestpacTrust profits grow 16% ($30 million) to $216 million in the half year to 31
March 2001.
WestpacTrust Chief Executive Tom Gallagher said: “This result continues the trend set in the last full year. The
increased profit has been boosted by our corporate banking arm and enhanced by strong growth in business loans.
Six months to
31 March 2001 $m Six months to
31 March 2000 $m Change
Net interest income 443 416 6.4%
Non interest income 229 222 3.1%
Non interest expense (369) (350) 5.6%
Bad and doubtful debts expense (11) (21) (47.1%)
Income tax expense (65) (66) (1.7%)
Net profit after tax and minority interests 216 186 15.9%
“Our Business unit is performing strongly under a new management structure and with a focus on growth and service.
Agribusiness is growing on the back of increased rural confidence, particularly in the South Island, and we have
increased our commitment to small and medium businesses with a specialist service centre, new products and an increased
team of managers.
“However, our retail operation operated in a challenging environment, with a sluggish housing market, and pressure on
interest margins. We are competing strongly for market share and have introduced a range of initiatives over the last
year including: special home loan packages; a specialist unit for mortgage brokers to make it easier for them to deal
with us; and market leading interest rates. This has resulted in stronger sales in the first quarter of 2001.
“Competition continues to put pressure on margins but customers are benefiting as a result,” Mr Gallagher said. “When
wholesale rates started falling this year, we decided to lead the market in passing on reductions in interest rates. We
have also been actively communicating with customers on how they can manage their loans better. As a result home loan
customers have saved millions of dollars in interest costs.”
WestpacTrust Financial Services continues to have one of the highest net inflows of any New Zealand fund manager and is
a leader in term life insurance sales, benefiting from the bank’s large customer base and large branch network.
“WestpacTrust Financial Services’ performance is a reflection of our focus on providing simple investment products
through our branch network, our investment in staff by putting greater resources into training and selling based on
customers’ needs. This has helped us attract and retain customers,” Mr Gallagher said.
“We have moved to a segment based marketing model that has seen us develop a range of product packages for personal and
business customers, as well as marketing initiatives such as the recent launch of Exchange magazine. These packages have
resulted in personal customers actually paying less in basic bank fees this half year due to the discounts on banking
services the packages provide. There have also been no increases in bank fees during this period.”
Interest margins continue to decline, though overall interest income is up due to increased business volumes.
Non-interest expenses increased slightly to $369 million due to added costs involved in corporate lending, but core
business operating costs rose only 1%. WestpacTrust’s expense to income ratio was stable at 51.7%. Non interest income
was flat, though fee income from WestpacTrust Financial Services was strong.
“Community is a particular focus for WestpacTrust and this year we raised over $100,000 for Life Education Trust through
a special term investment. We also launched a new low interest graduate loans scheme that will help graduates pay off
their student loans faster and more cheaply.”
Overall, WestpacTrust’s asset base has grown by $5 billion on the same period last year and nearly $3 billion in the
last half year alone. Mr Gallagher warned that the credit cycle is changing as a result of the global economy slowing,
so credit quality will be a focus over the coming year.
“WestpacTrust is appropriately provisioned for bad and doubtful debts given the change in the credit cycle. This half
year we have benefited from a recovery of doubtful debts previously provisioned for, which has helped halve our bad and
doubtful debts charge.”
ENDS
For more information, please contact:
Jane Anderson
WestpacTrust Public Relations Manager
04 4981 657
025 502 325