By Stuart Condie
SYDNEY–Westpac Banking Corp reported a small fall in first-half profit, but said that lower impairment charges suggest Australia credit cycle has passed its low point.
Australia’s second-largest bank by market capitalization on Monday posted a net profit for the six months through March of 3.32 billion Australian dollars, equivalent to about US$2.14 billion.
That was lower than the average analyst forecast of A$3.43 billion, according to Visible Alpha, and about 1% down on the A$3.34 billion it reported a year ago.
Revenue rose by 1.9% to A$10.79 billion, compared with the A$10.91 billion that analysts were looking for.
A net interest margin of 1.88% compared with 1.95% across its last full fiscal year and analysts’ expectation of 1.91%. Australia’s central bank is widely expected to cut the cash rate next week, which could add to margin pressure.
Westpac raised its interim dividend to A$0.76 from A$0.75, but did not repeat the A$0.15 special dividend that it declared a year ago.
Chief Executive Anthony Miller said that geopolitical uncertainty was as high as it had been for a very long time, but that consumers continued to show impressive resilience following a period of high inflation and elevated interest rates.
“This resilience is reflected in the improvement in credit quality metrics indicating we may have passed the low point in the cycle. Mortgage delinquencies and impairment charges remain low,” said Miller, who led Westpac’s business and wealth division before replacing the retiring Peter King as CEO in December.
Westpac’s loan book grew by 5.1% from 12 months earlier to A$824.81 billion, helped by a 14% rise in business lending and a 15% rise in institutional lending.
Impairment provisions rose just 1.2% to A$5.14 billion, while credit impairment charges represented 6 basis points of average loans for the period, down from 9 basis points a year earlier.
Westpac’s bottom line included A$140 million of previously disclosed hedging items, the impact of which the lender has said will reverse over time.
Excluding one-off items, net profit slipped 1.4% to A$3.36 billion.
Westpac is in the midst of a costly technology overhaul initiated by King. Operating expenses rose 5.6% on year to A$5.70 billion, including A$1.48 billion in technology expenses.
Many analysts have warned that the project could cost more and take longer than anticipated.
Write to Stuart Condie at [email protected]
(END) Dow Jones Newswires
05-04-25 1827ET
