Westpac's NZ unit FY cash earnings rise 9 percent as lending grows, impairments fall

Monday 4th November 2013

Westpac Banking Corp's New Zealand unit reported a 9 percent increase in full-year earnings after lifting deposits and lending and holding expenses unchanged, making up for margin shrinkage.

New Zealand cash earnings, which exclude one-time items, rose to $770 million in the year ended Sept. 30, according to its Australian parent's results.

New Zealand generates 9 percent of earnings for Australia's second-largest lender, excluding its group businesses and Westpac Pacific business. The parent today posted an 8 percent gain in cash earnings to A$7.1 billion, meeting estimates, while its net interest margin shrank 2 basis points to 2.15 percent. Revenue from ordinary activities climbed 4 percent to A$18.6 billion.

Westpac's expansion plans include agreement last month to acquire the Australian equipment and motor vehicle finance, and corporate loan portfolio of Lloyds Banking Group for A$1.45 billion, which it estimates will add at least A$100 million to 2015 cash earnings.

In New Zealand, deposits rose 11 percent while lending climbed 4 percent, it said. Its margins were down about 10 basis points. Expenses were flat and its expense to income ratio fell by 15 basis points, the parent said. Impairment charges dropped 39 percent.

Net loans rose to $61.6 billion in the second half, from $59.4 billion in the same period a year earlier. Housing loans rose 4.5 percent to $37.5 billion and business and institutional loans gained 2.3 percent to $22.3 billion.

The proportion of variable rate mortgages fell to 37 percent from 43 percent.

Total deposits climbed to $46.6 billion in the second half from $42 billion a year earlier, of which term deposits increased to $24.9 billion from $23.1 billion and other deposits were up about 15 percent to $21.7 billion.

"The result was driven by a further improvement in both business and consumer asset quality and sound balance sheet growth, offset by the impact of industry-wide margin pressure," Westpac said.

Westpac will pay a final dividend of 88 Australian cents a share and a special dividend of 10 cents. The group's impairment charges fell to A$847 million from A$1.21 billion.

Westpac's New Zealand shares were unchanged at $39.50. Its ASX-listed shares were at A$34.58 on Friday and have climbed 33 percent this year.

BusinessDesk.co.nz

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