Westpac Group expects a positive second half of the year.
Photo by Gregor Richardson.
Australian-based Westpac Group produced improved profits
both in Australia and New Zealand for the six months ended
March 31, following on from the ANZ's profit announcement last
Overall, the group reported cash earnings of $A3.8 billion
($NZ4.06 billion) in the six months.
Core earnings, or operating profit before income tax and
impairment charges, were up 5% to $A5.8 billion in the
Westpac New Zealand reported a 17% increase in cash earnings
to $432 million.
While loan and deposit growth had increased 6% and 8%
respectively, intense competition and a customer preference
for fixed-rate mortgages saw margins compress, contributing
to 1% growth in revenue on the same period last year, Westpac
New Zealand chief executive Peter Clare said.
Expenses were well managed in the period due to the divisions
A further improvement in business and consumer asset quality
contributed to much lower impairment charges in New Zealand.
The New Zealand result was driven by a modest increase in
revenue, well managed expenses, improving asset quality and a
further strengthening of the balance sheet.
''In a highly competitive environment, we have concentrated
on meeting customer needs through focused investment and
simplifying processes. As the economy gains momentum, we are
well positioned to support its future growth,'' he said.
Westpac Group chief executive Gail Kelly said the group
result was driven by a strong operating performance from each
division, supported by a further improvement in asset
''I am pleased with this result and the momentum we have
built ... It is a strong performance and reflects the
consistent execution of our strategy, which has customers at
The balance sheet was strong and Westpac had sector-leading
positions in capital, credit quality and productivity, she
In the past six months, Westpac had provided $A41 billion in
new lending to Australian retail and business customers.
In her financial highlights, Mrs Kelly pointed to net
interest income of $A6.8 million, up 4%, with a 7% rise in
average interest-earning assets and a 0.8% fall in margins to
Margins fell a ''more modest'' 0.1% against the previous
''The decline in margins principally reflects more intense
competition, in particular in the institutional and New
Westpac's Australian housing loans increased 5% in the
period, personal lending rose by 21% and business lending
increased by 5%, including the contribution from the Lloyds
Group wide, customer deposits increased $A29 billion to $A389
billion, up 8%.
Mrs Kelly said the world economy had improved in recent times
with Europe pulling out of recession and the United States
slowly moving towards growth.
Partly offsetting that was a deceleration in growth in China,
although she expected China's growth rate to settle
''comfortably'' above 7%.
In Australia, while households remained cautious, the pace of
spending growth had lifted and confidence had risen, she
Housing markets had responded well to low interest rates and
housing construction was likely to boost economic activity.
An improving trend in the business sector was starting to
''Although the slowdown in the mining sector is well under
way, business confidence and conditions outside the mining
sector appear to have passed the lows in the investment and
"On these trends, it is reasonable to expect a sustained,
albeit modest, lift in business activity ... this year and
Mrs Kelly was positive about the second half for the group.
Following the result announcement, Westpac shares rose A4c to
$A34.91, ANZ was down A16c at $A34.18, the Commonwealth Bank
was A7c higher at $A79.21 and National Australia Bank had
gained A10c to $A34.66.