Westpac has reported its New Zealand mortgage book contributed 9% or A$84 million of the group's expected A$930 million increase in impaired loans in the December quarter, but that lending margins for the New Zealand operation were improving. In the last week both NAB and Westpac have reported to shareholders that their New Zealand operations had increased or were increasing margins to offset higher bad debt charges. This conflicts with comments from Reserve Bank Governor Alan Bollard that banks need to 'play their part' by passing on lower wholesale interest rates to customers, particularly in the business sector. Westpac Acting CEO Bruce McLachlan told interest.co.nz increased wholesale funding costs were mounting and the overall increase in margins was more of a short term issue. McLachlan said he expected the New Zealand banks would end up paying around 250 basis points over swaps when they sold their government guaranteed term loans on international markets. This would put upward pressure on longer term mortgage and other rates, he said. Westpac did not detail the overall New Zealand profit, but said revenues were stronger and that impairment charges for both business and housing loans had increased. "Our New Zealand business is operating satisfactorily in a very tough environment. Revenues are stronger, supported by improved margins, while impairment charges are higher in both the business and housing portfolios, reflecting the weak economic situation," Westpac said in its update statement. Delinquencies on New Zealand mortgages rose by 19 basis points in the quarter to 66 basis points, while unsecured consumer loan delinquencies rose 4 basis points in the quarter to 131 basis points, Westpac said in its presentation to analysts. * This article was first published yesterday in our daily subscription newsletter for the banking and finance industries. The email costs NZ$365 per annum and carries exclusive news and analysis for New Zealand banking and finance industry executives, regulators and investors. Sign up for a free trial here.
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