Westpac interest margin contracts in 3Q

Thursday 16th February 2012

Westpac Group net interest margin contracted in the first quarter, reflecting higher funding costs and lower Treasury earnings, contributing to a 3.2 percent decline in cash earnings.

Cash earnings fell to about A$1.55 billion in its first quarter, from A$1.5 billion in the same period a year earlier, the Sydney-based lender said in a statement. That lagged behind the A$1.6 billion forecast in a Reuters survey.

Markets-related income fell by A$200 million in what chief executive Gail Kelly called a “more challenging operating environment.”

Impairment charges rose to about A$300 million from A$280 million a year earlier. The net interest margin fell by 10 basis points in the latest quarter compared to the two preceding quarters.

“Funding costs rose materially through the December 2011 quarter, mostly through higher deposit costs,” the bank said. “This trend continued into the 2012 calendar year with both higher deposit costs and increases in wholesale funding costs further impacting margins.”

Kelly said operating conditions worsened in the latest three months, “with slowing global growth and an escalation in the European sovereign debt crisis leading to high market volatility and increased business and consumer caution."

“In aggregate, the Australian economy performed solidly with continued growth and easing inflation,” she said. “That said, activity in Australia continues to be uneven with some regions and industries showing little growth.”

Tier one capital rose to 9.8 percent.

New Zealand earnings were stronger with lower impairment charges, the bank said.

BusinessDesk.co.nz

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