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Westpac NZ boosts 1H earnings 7 percent on lending growth in housing, agri, smaller charges on bad debt

Friday 3rd May 2013

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Westpac Banking Corp's New Zealand unit boosted first-half earnings 7 percent from a year ago on increased mortgage and agriculture lending and a lower charge for bad debts.

Cash earnings rose to $370 million in the six months ended March 31, from $346 million a year earlier, the Sydney-based lender said in a statement. Net profit attributable to the parent's owners climbed to A$298 million from A$267 million, accounting for about 9 percent of the group's A$3.3 billion profit.

The New Zealand unit's net interest income grew 1 percent to $790 million, while impairment charges sank 32 percent to $67 million.

The Westpac group lifted cash earnings 10 percent to A$3.53 billion on a 4 percent gain in revenue to A$9.17 billion. It declared an interim dividend of 86 Australian cents a share and a special dividend of 10 cents.

The bank's New Zealand unit total lending grew 3 percent to $59.9 billion from a year earlier, with 3 percent growth in mortgages to $36.4 billion, mainly in "the target segment of loans with an LVR (loan to value ratio) less than 80 percent," it said in its segment commentary. The bank has 79 percent of its mortgage portfolio below an 80 percent LVR.

Westpac NZ had previously lifted its exposure to high LVR mortgages as an improving economy and bubbling housing market stoked demand. The Reserve Bank is looking to introduce macro-prudential tools to cool asset bubbles, including a limit on LVR lending.

The Westpac unit also lifted business lending 3 percent to $21.7 billion, and recorded 8 percent growth in agri loans, "comfortably ahead of system growth." The lender expanded its share of agri-banking, which has been a focus for the lender in recent years as it looks to readjust its lending profile away from property, where it was been overrepresented.

Net interest margins shrank 33 basis points to 2.38 percent after it included $7 billion of liquid assets to Westpac New Zealand from the group treasury. Excluding those assets, margins shrank 7 basis points due to strong competition for deposits and flat lending spreads after re-pricing in the low interest rate environment was completed.

Westpac's New Zealand term deposits grew 16 percent to $24.3 billion from a year earlier, with total deposits up 14 percent to $45 billion, as at March 31.

The dual-listed shares of the parent bank fell 0.3 percent to $40.80 on the NZX, and were A$33.90 before trading on the ASX opened.

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