News: WBC UPDATE 1-Westpac first-half profit falls 22 pct as refunds weigh

(Adds other performance metrics, CEO comment)

May 6 (Reuters) - Australia's No. 2 lender, Westpac Banking Corp (WBC) , posted a 22 percent fall in first-half cash earnings on Monday, hit by a surge in customer refunds following a landmark inquiry.

The company's cash earnings fell to A$3.30 billion ($2.30 billion) for the six months ended March 31, compared with A$4.25 billion a year earlier. That was lower than an average estimate of A$3.52 billion from six analysts polled by Reuters.

"This is a disappointing result reflecting weaker business conditions and the bank dealing decisively with outstanding issues, including remediation and resetting our wealth strategy," Chief Executive Officer Brian Hartzer said in a statement.

Westpac, like the other "Big Four" Australian banks, is spending millions to right wronged customers and nurse its reputation after the an inquiry exposed wrongdoing at Australia's top financial institutions.

The lender, which serves over 14 million people, last week flagged a A$617 million hit to first-half cash earnings related to provisions for refunding wronged customers.

Westpac's net interest margin — a closely watched gauge of bank profitability showing the difference between interest costs and interest earned — fell 16 basis points to 2.12 percent during the reported period. Net interest income fell 4 percent.

In August, the lender raised its key mortgage rates in an effort to preserve its profit margins in the face of higher wholesale funding costs.

But a property downturn and tighter lending conditions following a regulatory crackdown have Australian banks wrestling for new customers, making it harder to write new loans.

Westpac's common equity tier 1 capital ratio, a key measure of financial strength, was 10.64 percent as of March 31, the same as at the end of September 2018.

It maintained its interim dividend at A$0.94 a share.

($1 = 1.4325 Australian dollars)