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Westpac predicts impairment charges to rise as growth slumps

Thursday 11th December 2008

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Westpac Banking Corp., Australia's biggest lender by market value, expects impairment charges will increase in the next 12 months as the slump in global economic growth makes life tougher for some customers.

"There is absolutely no room for complacency," Chairman Ted Evans told shareholders at their annual meeting in Sydney today. "We expect our balance sheet growth will slow and our impairment charges will grow as the economy slows," he said.

The Australian lender this week completed a A$2.5 billion share placement, strengthening its balance sheet and giving it more scope to grow after the A$14 billion acquisition of St George Bank effective last month. Westpac set aside A$500 million for "acquisition adjustments" following the takeover of St George, whose loan book included the failed Allco Finance Group and ABC Learning Centres.

Evans said the task of merging the two banks "should not be under-estimated" though the board is "extremely pleased" with the transaction.

Westpac, Commonwealth Bank and Australia & New Zealand Banking Group have raised more than A$9 billion selling shares and bonds this week to bolster their balance sheets amid increasing bad debts.

Evans said 2009 will be challenging with the world effectively in recession. "The year ahead will remain challenging for the economies in which we operate and for our customers," he said.

Shares of Westpac rose 0.3% to A$16.43 on the ASX in Sydney. The stock has declined 27% in the past three months.

By Jonathan Underhill

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