Westpac lifts profit 2pc, trims fees

"Dozens of fees have been cut or capped." Westpac NZ CEO David Mclean

People with money to deposit in the bank are now in the driver’s seat, Westpac’s chief executive said as its New Zealand arm reported a $462 million profit for the first six months of the year.

As a group, the Australianowned bank reported a A$4.017 billion (NZ$4.31B) cash profit for the first half of the financial year.

In New Zealand, lending growth of 7 per cent, including home lending growth of 6 per cent, was supported by term deposit growth of 11 per cent, with overall deposit growth of 3 per cent.

The bank’s New Zealand profit was up 2 per cent, year-on-year.

Westpac New Zealand chief executive David Mclean said the bank was maintaining its focus on quality lending and targeted growth in a challenging environment with pressure on deposit and wholesale funding margins.

‘‘We are seeing growth in positive sentiment and market share in key segments,’’ he said.

‘‘Westpac New Zealand’s campaign to support first-home buyers through the relaunch of our Homesaver offering aligns with a steady increase in withdrawals from the Westpac Kiwisaver Scheme by first-home buyers.’’

Mclean said the bank was not worried about the housing market. A recent slowdown was the result of a number of factors, he said, including signals that interest rates will slowly rise and that the Reserve Bank may introduce debtto-income ratios.

He said whether the change was permanent or just a breather remained to be seen.

A more significant downturn was unlikely because supply and demand imbalances were still causing pressure, he said.

But people hoping to pit banks against each other for the best home loan deal could be disappointed. Mclean said banks had been competing hard for deposits, realising the benefits in sourcing money from New Zealand depositors rather than relying on offshore funding.

‘‘The competitive environment has moved a bit away from lending to deposits,’’ he said.

That meant the margin being paid to people with money in the bank was improving, he said.

Funds in Westpac’s Kiwisaver scheme have risen 20 per cent in the past year. The average balance is up from $5800 in December 2012 to $11,400 in December 2016.

‘‘Our customer-centric strategy is coming to life with reduced banking fees, one of several changes that have contributed to an 18 per cent drop in customer complaints.’’

Mclean said the bank had set out to identify the root cause of complaints and had determined that many customers did not understand the fees they paid or the value they received in return.

Fees were reviewed to ensure they were fair and transparent, he said, and many had dropped over the half-year. ‘‘Dozens of fees have been cut or capped.’’

Westpac group chief executive Brian Hartzer said: ‘‘This is a solid result given the current complex operating environment.

‘‘We have been disciplined in balancing growth and returns, with cash earnings up 3 per cent over both the previous half and the same period last year.’’

IG Markets’ Chris Weston said expectations were for a A$4.021b profit, although the bank did match predictions of a 94-cent dividend and 14 per cent returns on equity.

The result came after ANZ posted a A$3.4b profit last week and National Australia Bank, which owns Bank of New Zealand, announced a A$3.29b profit a few days later.

Both those banks played up a focus on costs in their results as margins were crunched.

Hartzer did likewise in a statement to the Australian stock exchange yesterday morning.

‘‘Our consumer and business banks continued to grow in targeted areas but margins were affected by higher funding costs,’’ he said. –with Sydney Morning Herald