Westpac profit holds steady on rise in margins and higher lending

AUSTRALIA’S Westpac Banking Corp posted a steady third-quarter profit on Thursday, buoyed by wider margins, on the back of fewer liquid assets and small gains in lending and deposits.

The country’s third-largest lender reported a net profit of A$1.9 billion (S$1.58 billion) for the three months to June 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.

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.

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

Australian interest rates have eased from a 12-year peak over the past six months, fuelling both home and business lending. The Reserve Bank of Australia has cut its key cash rate by a total of 75 basis points this year, including a quarter-point reduction earlier this week.

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“The resilience of both households and businesses has been aided by the reduction in interest rates and the moderation of inflation,” said CEO 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 program.

Late mortgage repayments fell three basis points from a year earlier, the bank added.

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

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