Westpac's NZ first-half earnings rise 17 percent on declining impairment charges

Monday 5th May 2014

Westpac Banking Corp's New Zealand unit lifted first-half cash earnings 17 percent as it took fewer charges on impaired loans and kept a lid on operating expenses.

New Zealand cash earnings rose to $432 million in the six months ended March 31 from $368 million a year earlier, according to the Australian parent's results. Impairment charges plunged 94 percent to $4 million with a reduction in stressed assets and fewer mortgage delinquencies beyond 90 days. Operating income increased 1 percent to $1.02 billion, while expenses shrank 2 percent to $422 million.

"Intense competition and a customer preference for fixed-rate mortgages has seen margins compress, contributing to 1 percent growth in revenue on the same period last year," the bank said. "A further improvement in both business and consumer asset quality contributed to much lower impairment charges."

The local Westpac unit generated about 11 percent of earnings for Australia's second-biggest mortgage lender. Westpac today lifted first-half cash earnings 7 percent to A$3.77 billion, while its net interest margin shrank 8 basis points to 2.11 percent. Net operating income rose 7 percent to A$9.79 billion.

The bank's New Zealand unit increased net loans 6 percent to $63.2 billion from a year earlier, with $38.6 billion of mortgages and $22.8 billion of business lending. Westpac said high loan-to-value ratio mortgage lending, which faces Reserve Bank-imposed restrictions, accounted for 7 percent of new loan flows in the half.

Term deposits increased 1 percent to $24.5 billion from a year earlier, with other deposits up 15 percent to $23.9 billion.

Westpac will pay a fully-franked interim dividend of 90 Australian cents per share, up 5 percent from a year earlier.

The dual-listed shares rose 0.8 percent to $37.50 on the NZX. Its ASX-listed shares closed on Friday at A$34.87, and have gained 7.7 percent this year.

BusinessDesk.co.nz

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