westpac cash profit expected to rise

AAP

Westpac Banking Corporation Ltd is expected to sidestep the bad debt troubles faced by ANZ Banking Group Ltd and report a healthy eight per cent rise in first-half cash profit on Thursday.

The consensus analysts' forecast for Westpac's cash profit, which strips out one-off items, is $1.815 billion, up 8.16 per cent on last year's figure of $1.678 billion.

Thursday's results presentation in Sydney will stand out as the first for new Westpac chief executive Gail Kelly, who left the CEO post at St George Bank Ltd last year to replace David Morgan.

Like all the other banks, Westpac has been lifting interest rates on its lending products to offset higher wholesale borrowing costs caused by a global liquidity squeeze.

The banking analysts at JP Morgan believe Westpac anticipated the severity of the impact of the credit market turmoil before anyone else.

"With superior asset quality and an apparent earlier than peer group awareness of the funding implications of the global credit crunch, we expect new Westpac CEO Gail Kelly to focus on these key, currently topical issues," its analysts said.

Apart from higher funding costs and the high-profile collapse of several big clients that were unable to tap working capital from frozen credit markets, Australia's banks are basking in a local economy that remains relatively strong.

Demand for exports is being fuelled by developing nations such as China, so demand for credit from business is buoyant.

Investors and journalists will question Mrs Kelly on whether demand for credit from business, but also from retail customers taking out home and other loans, has been slowed by rising interest rates.

They will also be listening for Mrs Kelly's plans for the bank but are likely to be disappointed, according to JP Morgan.

Its analysts say Mrs Kelly is more likely to focus on a "first impressions" type of analysis of Westpac and highlight any opportunities to drive cost savings from the bank's core business.

"With new CEO Gail Kelly only three months into the role, we would not expect any detailed strategy statements at this state," said Credit Suisse.

Credit Suisse analyst Peter Anderson said Westpac's anticipated low level of bad-debt provisioning was likely to be the most obvious differentiator between it and ANZ.

"At this point we'd think there would be a small risk of any nasty surprises because they haven't disclosed anything," he said.

ANZ booked a provision charge for its half year of $980 million, which had been announced earlier to the market. Its cash profit fell by 14 per cent to $1.674 billion.

National Australia Bank Ltd is expected next week to report a modest, single-digit rise in cash profit of around four per cent.

St George Bank Ltd, which also reports this month, has stuck to its forecast of achieving a rise in earnings per share of at least 10 per cent and is expected to post a similar rise in cash profit.