SYDNEY: Westpac Banking Corp’s half-year profit climbed as a continued recovery in the nation’s economy drove a further reduction in pandemic loan-loss provisions at Australia’s second-largest lender.
Cash earnings rose to A$3.5bil (US$2.7bil or RM11bil) in the six months through March 31, compared with A$993mil in the same period a year earlier, the Sydney-based bank said in a statement yesterday. ‘
That beat the A$3.4bil average estimate of three analysts surveyed by Bloomberg.
The firm will pay a 58 Australian cent interim dividend.
Westpac is the first bank Down Under to update investors this earnings season amid a V-shaped rebound in the economy that’s allowing lenders to wind back bad-debt provisions faster than initially expected.
Chief executive officer Peter King is helming the firm’s sharper focus on core banking and efforts to drive down costs.
“Most significantly, unemployment is falling and there are more people employed now than pre-Covid,” King said in the statement.
“A strong labour market will continue to support growth in the economy.”
The firm’s mortgage book for Australia grew by A$2.6bil over the six months as an expansion in owner-occupier loans offset lower lending to investors.
King warned that house-price growth would moderate as more homes come on the market for sale.
Westpac will target an A$8bil cost base by the full year of 2024, according to the statement. Meantime, the lender continued to reduce its branch network, shutting 40 in the first half of the year.
These are “solid results overall,” Goldman Sachs Group Inc analysts led by Andrew Lyons, wrote in a report.
Among the highlights are:
> Net interest margin on cash basis rose to 2.09% from 2.03%.
> Return on equity climbed to 10.2% from 2.94%.
> Westpac expect costs to increase in full-year 2021, before starting to fall in 2022.
> Westpac New Zealand CEO David McLean will retire after more than 20 years with the group; firm continues to assess future of its NZ unit.
> The firm will see a A$372mil impairment benefit after booking a A$2.24bil charge in the earlier period.
The shares rose 2.9% in Sydney, extending this year’s surge to 33%.
“The dividend of 58 US cents a share and 60% payout ratio is a bit disappointing,” said Matt Ingram, a Sydney-based analyst at Bloomberg Intelligence.
“And the cost target, where they are talking about taking more than US$2bil out by 2024, is hugely ambitious.” — Bloomberg