Westpac profit grows 5% on margin lift and higher lending

Australia’s Westpac Banking on Thursday (Aug 14) said wider margins and lending and deposits gains helped it post slightly higher third-quarter profit, sending its shares surging more than 5 per cent.

The country’s third-largest bank by market value reported a net profit of A$1.9 billion (S$1.6 billion) for the three months to Jun 30, 5 per cent higher than the A$1.8 billion a year earlier.

Westpac’s net interest margins, the spread between interest earned from loans and paid to depositors, came in at 1.99 per cent in the quarter, compared with 1.92 per cent a year ago. Net interest income was A$5 billion in the quarter, up 4 per cent from the quarterly average in the first half.

Customer deposits grew by A$10 billion during the quarter, while gross loans jumped by A$16 billion, the bank said in a trading update.

Westpac shares rose to A$35.66 to trade at their highest point in a decade. The bank’s shares are up 4.9 per cent so far this year and have risen nearly 20 per cent in the past year.

Australian banking stock valuations, led by the Commonwealth Bank of Australia, have soared in the past year on the back of increased foreign investor demand, and are considered among the most highly valued in the world.

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Contribution from Westpac’s treasury and markets segment also climbed sharply from a year ago, helped by a favourable interest rate environment.

The Reserve Bank of Australia has cut its key cash rate by a total of 75 basis points (bps) this year, including a 25 bps reduction this week.

“The resilience of both households and businesses has been aided by the reduction in interest rates and the moderation of inflation,” said Westpac chief executive officer Anthony Miller.

“This is reflected in lower levels of customer stress. It should also underpin a recovery in private-sector activity and support lending growth.”

Miller, who took over as CEO in December, has since focused on cutting costs and streamlining operations and technology under a strategy dubbed Unite. Quarterly expenses rose, driven by higher salaries and wages and a planned boost in investment for the programme.

Late mortgage repayments fell 3 bps from a year earlier, the bank added.

The results follow the Commonwealth Bank’s report on Wednesday of its strongest annual cash earnings.

The second-largest lender, National Australia Bank, is set to report its Q3 earnings next week. REUTERS