Westpac says mortgage growth will slow as profit lifts

WESTPAC has increased its first- half profit 3 per cent to $ 4.02 billion, but says the demand for housing credit that helped lift the performance of its consumer bank is set to slow.

Cash earnings from the consumer bank were up 5 per cent for the six months to March 31 at $ 1.511 billion as total loans grew 6 per cent and deposits by 7 per cent. Domestic mortgages grew 2 per cent over the first half – and by 6 per cent from a year earlier – but Australia’s second largest lender expects demand for housing credit to fall as regulatory measures take effect.

The bank expects mortgage growth of 5 per cent in 2018.

“We remain positive about the Australian housing market, although we expect price growth to moderate through 2017,” chief executive Brian Hartzer said. “Housing credit growth is likely to ease a little as demand slows.”

The comment echoed that last week from ANZ chief executive Shayne Elliott, who said he was positioning his bank for a period of low credit growth.

Banks have repriced their loan books to make interestonly and investor loans more expensive in order to comply with Australian Prudential Regulation Authority limits.

Mr Hartzer said Westpac’s margins should benefit over the rest of the financial year from that repricing.

Net interest margin declined 0.4 percentage points over the first half to sit 0.7 percentage points lower than a year earlier.

“Net interest margins may rebound a little in 2H17, but the risk to already weak sector rev- enue trends is heightening given regulatory actions,” Citi analyst Craig Williams wrote.

Mr Hartzer said property price growth is expected to moderate in Sydney and Melbourne, with pockets of falls where there has been overbuilding of apartments.

The proportion of delinquent mortgages remained low by historic standards, with 70 per cent of customers ahead on their home loans.