Westpac ‘relieved’ by $583m half-year profit
Westpac New Zealand’s bounce back is ‘‘quite a huge relief’’, says the Australian-owned bank’s chief executive.
The bank almost doubled its halfyear profit to $583 million in the six months to March 31, compared to $297m a year earlier. The result was on the back of reduced provisions for bad loans after the economic effects of Covid-19 have so far proven less disastrous than first feared.
‘‘Compared to what I expected a year ago this is vastly different and quite a huge relief,’’ said chief executive David McLean.
‘‘Last year we took a lot of provisioning for what we expected were going to be huge losses coming through the economy from Covid, and of course good health outcomes mean good economic outcomes mean that we’re not seeing that level of losses come through anywhere to that extent.’’
The company clocked up an impairment charge of $211m for the same period a year earlier, as opposed to a $99m benefit.
‘‘So it’s an unwinding of those provisions which now obviously with the benefit of hindsight weren’t needed.’’
A decision about a possible sale of Westpac by its Australian parent was likely within two to three months, he said.
Westpac said in March it was considering a ‘‘demerger’’ of its New Zealand business.
‘‘Partly it’s driven by their own agenda over there, to simplify their business and get down to a smaller group of core businesses, and partly driven by looking with a hard-nosed rational view of whether you’d invest in New Zealand under the new rules which include increased capital, and include outsourcing policy which means we’ve got to be a bit ring-fenced from the parent, meaning it’s hard for them to get the synergies of running the two businesses very close together,’’ McLean said.
‘‘Those policies are very similar to what’s happened around the world so we’re not necessarily out of step with other countries on that, but it does mean they’re taking a hard-nosed look at it.’’
If Westpac Australia decided to proceed, it was likely to be a sale to shareholders rather than a private buyer.
‘‘The word they used was demerger, and I think that signals if they were to do it, how they’d be likely to do it would be to just issue all the shares in the New Zealand company to their own shareholders.’’
McLean said Westpac NZ was prioritising independent reviews of its liquidity risk management and risk governance, as required by the Reserve Bank of New Zealand. ‘‘A team has been established to work solely on these reviews. We’ve been focusing on these areas for some time and are now adding even more resources.’’
Lending increased 4 per cent over the half year. McLean said Westpac had lent money to firsthome buyers of 3512 homes, up 35 per cent year-on-year.
The bank did not expect to see the housing market continue at current high levels, partly as a result of Government policies to dampen down investor activity.
‘‘We’re expecting a much lower growth in the housing market over the next year than we’ve seen in the last year, and I think that quite frankly that’s probably a good thing,’’ he said.
‘‘The biggest danger for us is that there’s a massive downward correction in house prices, for example. And that’s a much bigger factor for us than any increased profit we get from increased prices.’’
‘‘Compared to what I expected a year ago this is vastly different and quite a huge relief.’’ Chief executive David McLean