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Westpac lifts June quarter cash earnings

Monday 23rd August 2010

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Westpac's cash earnings rose 27% to about A$1.4 billion (NZ$1.76 billion) in the June quarter, the bank says.

Last year, it said June quarter cash earnings were about A$1.1 billion. It didn't report net profit for either quarter.

"The third quarter of the 2010 financial year has seen another solid performance," said chief executive Gail Kelly in a statement.

"Our multi-brand strategy continues to be a key point of differentiation, offering broader choices to customers and attracting more business to the group as a result."

Westpac owns both that brand and the St George brand in Australia.

"We expect further improvement in our businesses as we develop better technology and processing infrastructure to support our brands," Kelly says.

Still, the operating environment remains "challenging".

The Australian economy remains robust but conditions in Europe and signs of slowing US growth have led Westpac to lengthen the term of its wholesale funding and to increase its liquid assets, she says.

Westpac's funding costs continue to rise with wholesale funding more expensive and amid greater competition for customer deposits.

Westpac says its asset quality is stabilising with impairment charges falling to about A$300 million in the June quarter compared with an average of A$440 million for the previous two quarters and the A$800 million quarterly average through the year ended September 2009.

Kelly says despite the improving trend, Westpac is seeing a further rise in small businesses experiencing stress and consumer deliquencies are a few basis points higher but less than one half of a per cent of mortgage borrowers are more than 90 days past due.

The bank says it lent an additional A$7 billion to households and small businesses in the quarter while customer deposits rose A$4 billion. However, its net interest margin fell to 2.17%, down two basis points from the March quarter.

Revenue fell 1% on lower treasury and markets income while its retail, business banking and St George revenues were slightly higher in the quarter.

Westpac says it has raised A$40 billion in wholesale funding in the nine months ended June 30, completing its funding needs for the year.

Last week, Westpac's New Zealand subsidiary released its general disclosure statement (GDS) showing its net profit rose nearly four-fold to NZ$97 million in the June quarter from NZ$26 million in the year-earlier quarter as charges against profit for bad loans fell to just NZ$27 million from NZ$199 million in the year-earlier quarter.

Westpac hasn't released the June quarter GDS for its New Zealand branch, which will include its total New Zealand operations, including its wholesale trading operations.

Westpac shares are trading at NZ$28.50 on the NZX, up 15 cents from Friday. They have traded between NZ$25.12 and NZ$37.10 over the last 12 months.

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