Westpac posts 6% drop in first-half profit on bad-debt charges

Wednesday 6th May 2009

Westpac Banking, Australia’s biggest bank by market value, posted a 6% decline in cash earnings after impairment charges for bad debts surged.

Earnings fell to A$2.29 billion in the six months ended March 31, from A$2.44 billion a year earlier, the Sydney-based bank said in a statement. It released pro-forma figures to take account of its acquisition of St. George Bank last year. Charges for bad debt about tripled to A$1.61 billion.

“While impairments have significantly increased over the period, we have also maintained a conservative approach to provisioning,” chief executive Gail Kelly said. “Importantly, we have further strengthened our balance sheet to ensure that we can continue to support of customers through these difficult times,” she said.

Shares of Westpac rose 2.3% to A$19.93 on the ASX and have advanced 15% so far this year. Westpac joins ANZ Bank, National Australia Bank and Commonwealth Bank in reporting a surge in bad debts. Still, Australia’s lenders are in robust shape compared to their counterparts in the U.S. and Europe, thanks to lower exposure to toxic mortgage related assets.

The lender lowered its dividend by a fifth to 56 Australian cents a share, the first time it has trimmed its payment since 1992.

Westpac’s Tier 1 ratio, a measure of a lender’s ability to absorb losses, was 8.4%, the lender said. The net interest margin rose by 24 basis points to 2.24%.

Businesswire.co.nz

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