Aus­tralia’s West­pac bank H2 profit beats fore­casts

The Pak Banker - - Front Page -


West­pac Bank­ing Corp., Aus­tralia’s third-largest lender by as­sets, re­ported a 9 per cent rise in sec­ond-half cash profit, beat­ing ex­pec­ta­tions on tight costs and said it had im­proved its bal­ance sheet de­spite a rise in bad debts.

West­pac said it expected to continue its growth mo­men­tum as Aus­tralia’s econ­omy had re­mained rel­a­tively ro­bust, al­though it warned sys­tem credit growth was likely to be mod­est.

West­pac is the last of Aus­tralia’s ‘big four’ banks to re­port full-year re­sults in a mixed earn­ings sea­son as they face their slow­est profit ex­pan­sion in three years and bad debt pro­vi­sions are seen ris­ing.

Aus­tralia’s sec­ond-largest mort­gage lender said sec­ond­half net profit came in at A$3.4 bil­lion (Dh12.9 bil­lion), com­pared with A$3.1 bil­lion a year ago and A$3.24 bil­lion expected by an­a­lysts.

The best per­formed of the ma­jor banks, West­pac shares added 1.1 per cent in a fall­ing mar­ket to take its gains so far this year to more than 25 per cent, well ahead of the broader mar­ket and its peers. The bank re­ported a rise in bad debt pro­vi­sions, which had fallen sharply for the past three years at all ma­jor banks, but have started nudg­ing up as the econ­omy cools, high­light­ing the chal­lenge ahead for profit growth.

“As with most banks at the mo­ment, rev­enues are rea­son­ably pedes­trian, lend­ing is fairly flat,” Arn­hem In­vest­ment Man­age­ment port­fo­lio man­ager Mark Nathan said.

Nathan said bad debt pro­vi­sions at West­pac and the other large Aus­tralian banks — Na­tional Aus­tralia Bank (NAB), Com­mon­wealth Bank of Aus­tralia and Aus­tralia and New Zealand Bank­ing Group — will continue to rise this year as more small and medium-size busi­nesses fail.

“It will be a mod­est pickup but enough to im­pact the only mod­est growth that the sec­tor is ek­ing out,” he said.

West­pac’s cash earn­ings for the year to Septem­ber 30 rose to A$6.6 bil­lion, mark­ing the third con­sec­u­tive year of record prof- it. Cash profit ex­cludes one-offs and non-cash ac­count­ing items and is closely watched by in­vestors. “This is a strong re­sult in a lower-growth eco­nomic en­vi­ron­ment,” said chief ex­ec­u­tive Gail Kelly, not­ing 12 per cent growth in de­posits and a 4 per cent rise in lend­ing.

Aus­tralia, among the few de­vel­oped coun­tries to avoid a re­ces­sion dur­ing the global fi­nan­cial cri­sis, is com­ing un­der pres­sure from slow­ing Chi­nese growth, which is weigh­ing on the min­ing sec­tor that has so far helped shield its econ­omy.

Last week, NAB re­ported bad debt pro­vi­sions rose 44 per cent to A$2.6 bil­lion, hurt by its loss-mak­ing UK unit and the cool­ing Aus­tralian econ­omy. West­pac said on Mon­day its full-year im­pair­ment charges rose 22 per cent to A$1.2 bil­lion as some write­backs in 2011 were not re­peated in 2012.

As­set qual­ity im­proved with stressed as­sets to to­tal com­mit­ted exposures fall­ing 31 ba­sis points to 2.17 per cent. Bad debt charges as a per­cent­age of av­er­age loans edged up to 0.24 per cent in the sec­ond half.

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