Solid economy helps Westpac lift H1 profit

Westpac has posted a rebound in half-year earnings as an improving economy helped it dodge potential pitfalls and boosted activity in the key home loans market.

Australia's second-largest lender on Monday reported first-half cash earnings, which strip out items like hedging impacts and one-off events, more than trebled to $3.5 billion after it wound back some provisions to cover potential loan losses.

Statutory net profit for the six months to March 31 was 189 per cent higher at $3.4 billion, a respite from the challenging period in 2020 due to the COVID-19 pandemic.

Westpac shares jumped on the news, hitting a fresh 52-week high. By 1205 AEST, the stock was up 4.3 per cent to $26.05.

"It has been a promising start to the year with increased cash earning, growth in mortgage and continued balance sheet strength," CEO Peter King said.

"While the economic outlook is more positive there is still some uncertainty."

Westpac had posted a slump in earnings for the same period last year, mainly due to hefty impairment charges related to the pandemic. It had also been forced to set aside funds for a potential legal penalty from AUSTRAC anti-money laundering proceedings that were settled late last year.

But the domestic economy is now rebounding, with falling unemployment and a pickup in business activity boosting consumer sentiment to its strongest level in more than a decade.

"Businesses are positive, with most industries responding to the brisk rebound in activity and the winding of COVID-19 restrictions," Mr King said.

He expects the Australian economy to expand by 4.5 per cent in 2021.

Westpac said lending for housing had surged and its Australian mortgage book expanded by $2.6 billion in the six month period, even though growth in owner-occupier loans partly offset by lower lending to investors.

Owner-occupier loans rose by three per cent, with first home buyers making up 13 per cent of new loans.

Monthly figures from CoreLogic showed house prices in capital cities have continued to climb, although at a slower pace than in March.

"While we expect continued increases in home prices, as the supply of houses increases, the rate of house price growth will likely moderate," Mr King said.

Ratings agency Moody's said the strong rebound in Westpac's results highlighted the improving operating environment for Australian banks.

"Asset quality metrics improved from the previous half but remain sensitive to the unwinding of government support measures," Moody's Investors Service vice president Daniel Yu said in a note.

Westpac on Monday also outlined a three-year plan to cut costs by more than $2 billion by divesting non-core businesses and ramping up digital offerings.

Meanwhile, the bank announced its New Zealand chief executive David McLean, would retire after more than 20 years with the group.

The lender will pay an interim dividend of 58 cents a share after scrapping payouts amid economic uncertainty a year ago. It had paid a modest 31 cents in the second half of the last financial year.


* Revenue up 1.0pct to $10.69b

* Cash profit up 256pct to $3.5b

* Statutory profit up 189pct to $3.4b

* Fully-franked interim dividend 58c vs NIL

Austrlaian Associated PressBack to Breaking News

  • Print this page
  • Copy Link