Westpac targets SME, agricultural lending in NZ

Westpac targets SME, agricultural lending in New Zealand

by Paul McBeth

Nov. 3 (BusinessDesk) – Westpac Banking Corp. is looking to lift its profile among small and medium-sized businesses and the agricultural sector as it looks to boost its commercial book in New Zealand.

Chief executive George Frazis told BusinessDesk Westpac has previously been underexposed to the SME and farming sectors, and is looking to attract more of these customers.

That’s part of the bank’s expansion strategy in New Zealand, which added eight new branches and 150 frontline staff, and has seen its 2.8% growth in commercial lending outpace the sector’s 4.6% contraction.

“In the past, banks haven’t fully serviced that segment (SMEs), and it’s an absolute focus for us,” Frazis said. “Agriculture is another sector where we’ve been a little underweight, and we’re increasing our share as part of that strategy.”

Westpac lifted its New Zealand cash earnings 36% to $322 million in the year ended Sept. 30 as it slashed its charges on impaired assets 39% to $347 million.

The lender’s operating income dropped 11% to $804 million as New Zealand’s sluggish recovery weighed on the bank’s profitability. Net interest rate margins shrank 13 basis points to 2.11%.

Frazis said big corporates have shored up their balance sheets in response to the global financial crisis and New Zealand’s worst recession in 18 years, but aren’t looking to seek credit yet.

“Large companies have reduced debt, but I haven’t seen a significant turnaround in demand for debt. I expect it will eventually come through export-driven growth,” he said.

Westpac has taken a prudent approach to new regulatory requirements from the Reserve Bank, and has a core funding ratio of about 75%, the target the central bank wants to lift the ratio to in the future.

The bank’s new credit strategy has an extension of its loan maturity profile to 647 days from 504 days a year ago, and about 60% of its lending is self-funded.

The bank’s shares rose 1.7% to $30.50 in trading on the NZX and 1% to A$23.54 on the ASX.

(BusinessDesk) 17:30:36

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