Westpac FY profit drops 10.7% as provisions rise

Westpac annual profit drops 10.7% as provisions rise, NZ earnings slide

Nov. 3 (BusinessWire) – Westpac Banking Corp., Australia’s second-largest lender, posted a 10.7% decline in full-year profit, reflecting a jump in impairment charges and a provision for the impact of a tax ruling in New Zealand.

Net profit fell to A$3.45 billion in the 12 months ended Sept. 30 from A$3.86 billion a year earlier, Westpac said in a statement today. Net operating income surged 42% to A$16.5 billion, driven by a surge in interest income.
Australian lenders have increased provisions for bad debts as that economy stuttered, squeezing customers’ ability to service their loans. Westpac’s impairment charges jumped to A$3.2 billion in the latest year, from A$931 million a year earlier.

Increased impairments reflect “deterioration in asset quality and Westpac’s prudent provisioning approach in light of the weakened economic environment,” chief executive Gail Kelly said.

She said credit growth is likely to remain subdued amid the lingering effects of the financial crisis, while average funding costs will rise amid “intense competition” for retail deposits while wholesale funding costs are “well above pre-crisis levels.”

Westpac’s Tier 1 ratio edged up to 8.1% while its cost-to-income ratio declined 3.1 percentage points to 40.2%. The bank’s net interest margin rose 30 basis points to 2.32 percent.

New Zealand earnings tumbled 50% to $236 million, reflecting a $402 million increase in impairment charges mostly due to commercial property. The parent made a tax provision of A$753 million related to the High Court ruling on its dispute with the Inland Revenue Department related to structured finance transactions between 1998 and 2002.

Cash earnings at Westpac’s retail and business banking unit grew 9% to A$1.9 billion while earnings at its institutional bank tumbled 58% to A$361 million.

St.George Bank earnings slipped 5% to A$1.04 billion, based on year-earlier pro forma numbers to reflect the acquisition of the regional lender.
BT Financial Group cash earnings slipped 8% to A$493 million.

The bank’s second-half profit sank to A$1.27 billion from A$2.18 billion in the first half.

The bank will pay a final dividend of 60 cents a share, bringing its full-year payout to A$1.16. Shares of Westpac climbed 0.7% to A$25.60 on the ASX today and have soared 51% this year.

(BusinessWire)

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