Westpac lifts half year cash profit to $4.25 billion

The aerial display as seen on New Year’s Eve at Sydney Harbour on December 31, 2016 in Sydney, Australia. Photo: Lisa Maree Williams/ City of Sydney/ Getty Images.

  • Westpac lifted cash earnings by 6% to $4.25 billion for the half year to March.
  • The result was within analyst expectations.
  • CEO Brian Hartzer described the result as “good quality”.

Westpac lifted cash earnings by 6% to $4.25 billion for the half year to March on the back of improved results across all the bank’s business lines, including consumer and business banking.

The result was within analyst expectations and, in early trade, Westpac shares rose 1.8% to $29.625.

Revenue was 4% higher at $11.15 billion and operating expenses rose just 1% to $4.65 billion. Statutory after tax profit was up 7% to $4.2 billion

The net interest margin improved by 10 basis points to Net interest margin 2.17%. Westpac’s impairment charge fell 20% to $393 million, or 11 basis points of gross loans.

Westpac declared a steady fully franked interim dividend of 94 cents a share.

CEO Brian Hartzer described the result as “good quality” built on consistent performance and a disciplined approach to growth and returns.

The bank says it added more than 370,000 new customers over the last 12 months, investing $1.3 billion in new services and upgrading the bank’s infrastructure.

“Our businesses continue to perform solidly, with the results for the Consumer and Business banks particularly good,” says Hartzer.

“All businesses increased core earnings over the prior half. We are pleased that there were no one-offs, making it a clean result.”

Hartzer says headwinds to the growth outlook include higher funding costs and increased scrutiny on the banking industry.

However, he says there are “opportunities to grow” and the economy is “fundamentally sound”.

Royal Commission

Hartzer acknowledged the “significant customer and community concerns” raised by the financial services Royal Commission, currently investigating a series of scandals, including the fee for no service issue, involving the major banks.

He sees the process provides a critical opportunity to restore customer trust across the sector.

“Westpac is already well advanced in taking steps that will improve customer outcomes,” he says.

“We have been actively seeking out instances where we’ve got it wrong, and in those cases, putting it right for the customers affected.

“Over the last three years we have reviewed more than 300 products and made over 150 changes to our products, policies, and business practices, including introducing a low rate credit card, removing sales incentives for tellers, and providing an independent advocate for our customers.

“This work is ongoing and we will continue to make changes to our business based on our reviews and feedback from our customers, our regulators, and the Royal Commission itself.”

Cash earnings at BT Financial Group, where the bank’s financial planners sit, were up 7% to $404 million.

APRA and the Commonwealth

Hartzer says last week’s report by APRA, the banking regulator, into the governance, culture and accountability of the Commonwealth Bank was a “wake up call for the whole industry”.

The Australian Prudential Regulation Authority found that a failure of culture was behind a series of scandals which eroded trust in Australia’s biggest bank, the CBA.

The regulator called the bank’s culture “insular” and an environment where learning from experiences and mistakes was ignored. And the bank’s the board of directors also had “inadequate” oversight of emerging non-financial risks and its senior executives had a lack of ownership of key risks.

“Clearly each company is different and has their own issues, but there are absolutely some general themes there that make it required reading for anybody in the industry,” says Hartzer at Westpac.

“We need to continue to challenge and question ourselves and we need to hold ourselves to account when things go wrong and we’re certainly very focused on learning the lessons from that.”

Westpac’s 2018 half year results at a glance:

Source: Westpac

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