Solid footing: Customers are seen at a Westpac Bank in the central business district of Sydney. The bank’s balance sheet is at its strongest in 29 years, says its chief executive. — AFP
SYDNEY: Westpac Banking Corp has lifted its dividend and says it will buy back A$1.5bil (US$980mil) of its own shares, offering investors some respite to the intense competition in the Australian mortgage market that’s testing profitability.
Net income rose 26% to A$7.2bil in the 12 months ended Sept 30 from a year earlier, according to a statement yesterday.
That missed the A$7.3bil estimate of analysts in a Bloomberg survey.
Australian banks are now getting less of a tailwind from higher interest rates as market pricing indicates hikes may be nearing an end.
Investors are assessing how big a hit net interest margins are taking and the extent of success with plans to rein in expenses.
“Consumer sentiment remains weak but there are glimmers of hope with some cost pressures starting to ease for businesses, which in time should flow through to prices paid by consumers,” chief executive officer Peter King said in the statement.
“We’re broadly positive about the economic outlook over the next year and Westpac is in a strong position to grow its business and support customers who need help.”
Westpac will pay a final dividend of 72 Australian cents per share.
King also reflected on the strength he sees in his firm’s capital position and in the home-loan market.
“A strong banking sector is vital for a resilient economy and Westpac’s balance sheet is the strongest I’ve seen in my 29 years at the bank,” King said in the statement.
“Margins increased two basis points and have been well managed through a period of intense mortgage competition.”
King also said progress continues to be made in bringing down costs.
This is part of the bank’s long-term efforts to simplify the lender’s operations.
“Our expenses are down 1% but we recognise there’s more work to do as we seek to lower our cost-to-income ratio relative to peers,” he said.
“Impairment provisions have increased to position the bank’s balance sheet appropriately for the present uncertain economic outlook.”
Bloomberg Intelligence said Westpac’s big buyback might be small comfort for investors facing a 10% to 15% drop in 2024 profit.
Last year’s exit margin suggests a big fall and impairments are set to rise further.
Costs might remain sticky as regulatory spend and inflation offset cost programmes, said Matt Ingram, senior industry analyst. — Bloomberg
