westpac first-half earnings jump

Westpac first-half earnings jump ERIC JOHNSTON
May 5, 2010 - 9:01AM
.A sharp fall in provisions for bad debts helped by an improved economic environment and a rebound in wealth management has powered Westpac Bank to a 30 per cent jump in its first half cash earnings which have nearly hit $3 billion.

Westpac chief executive Gail Kelly declared the Australian banking system was at a turning point with signs business customers starting to borrow again while the bad debts that have weighed down the sector over the past two years falling away.

The countys second biggest lender and owner of St George and BankSA, this morning handed down cash profit of $2.983 billion for the six months ended March 31, with much of the lifting coming from a $732 million drop in provisions for impaired loans and assets.

However a turnaround in Westpac's institutional business was overshadowed by a reversal in interim profit from its retail banking business despite notching up sales of new mortgages at nearly twice the rate of the broader market.

Indeed, Westpac's retail banking arm saw earnings drop 12 per cent to $873 million for the March half as the higher cost of wholesale funding and battle for deposits took its toll on interest margins. Earnings from Westpac's retail bank were also down 5 per cent from the September half.

Investors are likely to be disappointed by a drop in Westpac's group-wide interest margins, a move going against the trend of rivals such as ANZ which managed to increase margins despite the funding cost pain.

Westpac's net interest margin ended down 11 basis points for the half to 2.28 per cent.

St George Bank was also crimped by higher funding costs with earnings down 18 per cent to $472 million. However one bright spot for Westpac was BankSA, the only retail business to buck the trend delivering a fast-paced 9 per cent jump in cash earnings to $109 million.

Westpac declared a fully-franked interim dividend of 65 cents per share, compared with the 56 cents paid a year earlier.

''It reflects a much improved Australian economy and good momentum across all our businesses,'' Westpac chief executive Gail Kelly said in a statement.

''The Westpac Group is emerging from the global financial crisis in a stronger position and with a sustainable platform for growth.''

Mrs Kelly said that the bank had been able to extend its share in the Australian home loan market by two percentage points to 27 per cent, as it grew its home lending by $43 billion.

The bank also grew customer deposits, increasing its Australian market share to 24 per cent.

The growth in Westpac's home loan lending was equivalent to 1.6 times system growth while the household deposits growth was equivalent to 1.3 times system.

Westpac said impairment charges had been reduced by $732 million to be $879 million for the half.

Total provisions for impairments on loans and credit commitments came to $5.273 billion, compared with $4.734 billion six months earlier.