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Westpac Profits Leap 33 Per Cent
Australian banking major Westpac saw its first quarter cash earnings leap by 33 per cent clearly underlining the robustness of Australia’s major lenders, as the economy continues to recover.
The Sydney based lender released its quarterly trading update showing unaudited cash profits which do not include volatile items, increased to about $1.6 billion for the three month period ending December 31st.
Westpac’s strong results were helped by strong momentum across all its business lines and a sharp reduction in credit impairment charges.
Profit in the same time frame a year earlier was $1.2 billion.
Westpac’s quarterly result is stark evidence that the bad debt problem Australian lenders faced for much of 2009 has probably peaked, and that future earnings for the majors is likely to be strong.
Gail Kelly, chief executive of Westpac says the strong result clearly shows that there is an improved business environment.
“Although we remain cautious on the economic outlook, we believe that the worst of the crisis is now behind us and this is reflected in the significant fall in impairment charges,” Mrs. Kelly said.
Westpac’s credit impairment charge was about half the level recorded in the same time frame during the previous year. The group expects lower impairment charges for the remainder of the financial year, although it cautioned that some “variability” is likely.
“Consumer asset quality remains strong although we expect a small increase in delinquencies throughout the year,” Mrs Kelly said.
Last week rival CBA reported a 54 per cent surge in first half cash profits, driven by strong loan growth and a reduction in credit impairment charges.
Despite the impressive performance, Westpac face considerable pressure on its net interest margin, with a higher cost of funding eating into profits. Westpac says its customer margins declined by 5 basis points during the previous quarter, and that its fee based income had also fallen after the lender reduced or cut exception fees for both business and consumer banking customers.
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