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Westpac first-quarter profit rises about 33% on loan demand, fewer defaults

Tuesday 16th February 2010

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Westpac Banking said first-quarter profit jumped 33% as an improving economy stoked demand for loans and reduced defaults.

Cash earnings climbed to A$1.6 billion in the three months ended December 31, from A$1.2 billion in the same period a year earlier, the Sydney-based lender said in a statement, citing unaudited figures.Lending increased 1.7% in the first quarter while customer deposits climbed 1.4%, reflecting demand for term deposits. Impairments were A$400 million.

“Although we remain cautious on the economic outlook, we believe that the worst of the crisis is now behind us and this is reflected in the significant fall in impairment charges,” chief executive Gail Kelly said. “Consumer asset quality remains strong although we expect a small increase in delinquencies throughout the year.”

Customer margins fell 5 basis points in the first quarter, reflecting an increase in average cost of funds. Fee income fell after Westpac trimmed exception fees for consumer and business customers.

Shares of Westpac were unchanged at A$23.30 on the ASX and have declined about 11% in the past three months. Its NZX-listed shares rose 3% to $30.50 today.

Westpac raised A$21 billion in term funding in the first quarter, with the average tenor of new issuance rising to 4.8 years. It said average funding costs will continue to rise. In a separate statement, Westpac released its so-called Pillar 3 report, which showed its Tier 1 ratio was 8.5% at December 31, up 38 basis points from three months earlier.

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