Westpac first half cash profit below expectations with a flat $3.77 billion

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Westpac posted a flat and below expectation first half cash profit of $3.778 billion. Market analysts had expected $3.88 billion from Australia’s second largest bank.

Revenue was up 2% to $9.997 billion. Statutory net profit was $3.609 billion.

Westpac said the result was affected by a lower contribution from treasury and a $85 million post-tax charge following the introduction of methodology changes to derivative valuations.

Without the derivative adjustments, cash earnings were up 2%.

It’s the first result delivered by Brian Hartzer, the new CEO of Westpac, since he took over from the high profile Gail Kelly.

“In our retail and business banking divisions we had solid loan and deposit growth, along with well managed margins,” Hartzer said.

Australian housing loans increased 7%, personal lending rose by 7% and business lending increased by 5%. Customer deposits were up 8% to $420.3 billion.

Net interest margins, the money the bank makes on loans, were unchanged at 2.01%.

Hartzer said he was positive about the growth outlook for the Australian economy, with low interest rates, a lower Australian dollar and support from the housing sector.

“While I’m positive about the outlook, the economy is currently in transition and this means that we expect growth to be uneven across different industry sectors and geographies,” he said.

“Areas like housing, infrastructure, and agriculture will do relatively well, while other areas such as mining and resource-driven regions and adjacent service providers will find it tough.

“For Australian banks, this means that credit growth will be modest but positive with housing growing faster than business.”

Westpac posted an interim fully franked dividend of 93 cents per share, up 3%;

The other three big banks are also posting results this week. The ANZ half year result is on Tuesday with a forecast $3.7 billion and NAB’s is on Thursday with an expected $3.4 billion profit.

The Commonwealth is due to announce quarterly results on Wednesday. In February, it announced a first half profit of $4.62 billion.

Westpac’s shares are up from a low of $31.33 in December to $36.73 at Friday’s close.

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