Westpac New Zealand's half-year cash earnings rose 2% helped by lending growth and higher net interest margins.
Meanwhile, the bank said it has signed up nearly 20,000 customers for its Air New Zealand airpoints earning credit cards to date.
In terms of the nuts and bolts, Westpac NZ's cash earnings for the six months to March 31 rose $9 million, or 2%, to $441 million from $432 million in the same period of the previous year.
Net interest income was up 6% to $832 million, net operating income rose 5% to $1.077 billion, and operating expenses were up 4% to $437 million. Impairment charges on loans jumped to $31 million from $4 million in the first-half last year when write-backs/recoveries drove the low figure.
Net loans grew $3.4 billion, or 5%, to $66.6 billion by March 31 from March 31 last year.
Mortgage growth in line with market, business lending growth above market
In the six months from September 31 last year to March 31 this year, the first half of Westpac NZ's current financial year, net loans increased $2 billion, or 3%, with mortgages up $1.1 billion, or 3%, to $40.7 billion, and business lending up $900 million, or 4%, to $24 billion. The bank said half of business lending growth came in the agricultural sector, which has been a particular area of focus.
The mortgage lending growth was described as in line with system, and the business lending growth as above system.
In the six months to March 31 Westpac NZ grew total deposits by $2.1 billion, or 4%, to $51.5 billion, with term deposits down $100 million to $25.1 billion. However, the bank said deposit growth funded 90% of lending growth in the half-year, with Westpac's deposit to loan ratio up 80 basis points, since September 30, to 77.3%.
Westpac NZ's expense to income ratio dropped 10 basis points in the first-half, versus the same period last year, to 40.6%. And net interest margin rose two basis points during the first-half to 2.29%.
Funds under management at Westpac NZ rose $500 million in the March half-year, or 9%, to $6 billion.
Meanwhile, total stressed assets to total committed exposure rose to 1.75% at March 31 this year from 1.59% at September 30 last year.
About 19,250 Air NZ airpoints customers to date
Westpac NZ, which announced in March it was replacing BNZ as an Air New Zealand airpoints partner and targeting the 100,000 or so BNZ customers currently earning airpoints via their credit cards, says to date it has received about 27,500 applications for its airpoints products. This has delivered "straight through" approval of over 70% of all applications. At 27,500 applications, the 70% figure suggests about 19,250 customers have taken up the Westpac airpoints offer so far.
Westpac NZ says it has some 500,000 customers using the Westpac One internet and mobile banking platform that was launched in February, with this contributing to a 52% rise on average in online applications for cards, personal loans and home lending. The bank said 88% of online applications are being conditionally approved instantly, with 40% of all applications now made online.
Westpac NZ customer numbers were steady at 1.32 million.
No net profit after tax figure was released for Westpac NZ's half-year. Cash profit tends to be the big banks' preferred measure of financial performance. They say this is because it excludes items introducing volatility and one-off distortions unrelated to ongoing financial performance. However, the way banks report cash profit has come under fire from some banking analysts.
'Making hay while the sun shines'
"We feel we've got good momentum. We're fighting and we seem to be able to win in the very competitive market as much as we want to. So that's good, the front line bankers are doing a good job," said McLean.
With the economy looking "pretty solid," and nothing imminently that "looks like it's going to tank," Westpac NZ "should be making hay well the sun shines," McLean added.
Flat result from Westpac group
The Westpac Banking Group reported flat interim cash earnings of A$3.778 billion, which was below analysts' expectations for cash earnings of A$3.85 billion.
"Our operating divisions, particularly retail and business banking, have continued to perform well during the period. However, the headline result was impacted by derivative adjustments in our Westpac Institutional Bank business and a lower treasury result," Westpac group CEO Brian Hartzer said.
The Institutional Bank was hit by an A$85 million post tax charge as a result of derivative adjustments and a lower impairment benefit.
The Westpac group also said it would lift capital levels. As part of this process the board will apply a 1.5% discount to the market price of shares issued under its dividend reinvestment plan, and partially underwrite the dividend reinvestment plan.
The group's fully franked interim dividend was hiked 3%, or A1 cent, to A93 cents per share, and the group's cash return on equity fell 67 basis points to 15.8%. The group expense to income ratio rose 130 basis points to 42.5%, and the group net interest margin, excluding treasury and markets, was unchanged at 2.01%.
Here's the Westpac group results release, the Westpac group presentation, and a Westpac letter to shareholders.
1 Comments
Oopps
Westpac Banking Corp. shares slid the most since 2011 as its plan to raise A$2 billion ($1.6 billion) in capital fueled concern that Australia’s biggest banks will need more equity to meet stricter regulatory requirements.
Westpac, which revealed the capital proposal Monday as it reported lower-than-estimated profit, dropped as much as 4.9 percent, the biggest intraday drop since September 2011. The lender, the nation’s second largest by market value, sank 3.4 percent as of 1:51 p.m. in Sydney, while its three biggest competitors dropped at least 0.9 percent.
While their capital levels currently exceed minimum national requirements, Australian banks may face regulation demanding higher buffers including increased reserves against mortgage losses. Westpac said Monday a number of changes “are under discussion that are likely to impact future” capital, with Chief Executive Officer Brian Hartzer pointing to reforms from the global Basel Committee on Banking Supervision presenting “the bigger issue.”
The bank’s decision to raise equity indicates its board is concerned about capital levels and “ratios need to likely move higher for the sector,” said Omkar Joshi, a Sydney-based analyst at Watermark Funds Management.
To boost capital, Westpac said it’s offering a 1.5 percent discount to shareholders willing to swap all or part of their dividend for new shares and will also partially underwrite the dividend reinvestment plan to raise A$2 billion. Read more
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.