Westpac New Zealand lifted its cash earnings 9% to $770
million for the year ended September, the latest of the ''big
four'' banks to report an increased profit.
The latest report from a New Zealand-operated and
Australian-owned bank prompted the Greens to call for the
Government to strengthen Kiwibank.
Westpac NZ chief executive Peter Clare said the profit was a
strong all-round performance in a highly competitive
''The result was driven by a modest increase in revenue,
disciplined expense management and a focus on improving asset
quality and balance sheet strength.''
The improvement in asset quality was a highlight of the year,
reflecting a targeted approach to lending and the ongoing
lift in the New Zealand economy.
Overall lending increased 4% over the year, with strong
growth of 7% recorded in drawn and undrawn mortgages with a
loan-to-value ratio below 80%. Business lending rose while
stressed assets reduced.
Deposits grew 11%, which more than fully funded loan growth
for the year and led to an industry-leading deposit-to-loan
ratio rising nearly 5% to 76%.
Funds under management and administration in the wealth
business grew strongly, up 21% to $5.8 billion, with more
than $2 billion in KiwiSaver investments.
Mr Clare said the bank continued to invest in simplifying its
business and making banking easier and faster for customers.
Greens co-leader Russel Norman said Westpac's profit marked
the end of another record profit season for the ''big four''
Australian banks, which monopolised New Zealand's banking
Overall, ASB, ANZ, BNZ and Westpac made $3.7 billion in cash
profits in the past financial year, up 10.1% from last year's
''Our big four Australian banks are already some of the most
profitable banks in the developed world. This year they got
even more profitable. While it's good to have strong banks,
the excessive profits of the four foreign-owned banks are
simply damaging the rest of the New Zealand economy and
contributing to our No1 problem - a high and persistent
current account deficit.''
Competition could be increased by strengthening Kiwibank and
other New Zealand-owned banks, he said.
By injecting capital into KiwiBank and allowing it, in time,
to become the Government's banker, its capacity could be
increased to compete fairly with the much larger Australian
The banking system was the lifeblood of the New Zealand
economy. It was important to have it so all businesses could
prosper, not just the foreign-owned banks, Dr Norman said.
Westpac New Zealand's parent, Australian-listed Westpac,
produced an ''impressive'' cash profit of $A7.1 billion
($NZ8.15 billion), an 8% increase on the pcp, Morningstar
analyst David Ellis said.
The bank continued to benefit from moderate revenue growth
(up 4%), good cost control (expenses up 4%) and a sharp
improvement in bad debts (down 30%), resulting in earnings
per share rising 6% and a 5% increase in the tax-paid
dividend to $A1.74 a share.
Solid lending growth was sourced primarily from Australian
housing loans, with increasing numbers of customers taking
advantage of low interest rates and repaying home loans
faster than planned, he said.
Standouts were the increase in rate of returns (ROE) to 16%
and a second fullyfranked A10c per share special dividend,
confirming Morningstar's view the major banks continued to
generate surplus capital.
''Importantly, Westpac will neutralise the ordinary and
special dividend through a market buy-back.''
All business contributed to the strong result, with St
George, up 17%, New Zealand, up 16%, and wealth management,
up 13%, being the strong performers, Mr Ellis said.
''We are impressed with the strong year-on-year results but
second-half performance slowed compared to the first half.''
Net interest margins suffered and productivity was not as
good as in the first half.
Despite the softer second half, Mr Ellis remained confident
in the earnings outlook supported by a strong balance sheet,
capital levels exceeding the internal target range and
customer deposit growth far exceeding loan growth.
''The continued improvement in asset quality bodes well for
future earnings growth.''