Westpac’s Australian profit drops 12%, lower costs offer reprieve

A woman walks out of the ground floor of an office building with the Westpac logo amid the easing of coronavirus disease (COVID-19) restrictions in the central business district of Sydney, Australia, on 3 June 2020. Picture taken June 3, 2020. REUTERS/ Loren Elliott

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May 9 (Reuters) – Australia’s Westpac Banking Corp (WBC.AX) said on Monday that continued pressure on margins from competition in the mortgage lending industry caused first-half profits to tumble more than 12% from compared to a year ago, but Westpac expected lower spending in the second half with its cost reset plan in full swing.

Australia’s ‘big four’ banks have seen a housing lending boom, helped by low interest rates and a pandemic-fueled shift to remote working that has boosted property markets. But their margins have suffered from competition and the shift of borrowers to fixed rate loans.

Westpac said net interest margin, a key indicator of profitability, fell 15 basis points to 1.91% in the first half. It recorded an impairment charge of A$139 million ($98.1 million) as it set aside more funds to cover bad debt related to recent flooding in Australia and wider global uncertainty.

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“The first half of 2022 has been challenging for many customers. Flooding, the lingering effects of the pandemic and the impact of the war in Ukraine have set many customers back and created uncertainty,” the CEO said. Peter King.

However, the nation’s third-largest bank expected second-half costs to be flat at 2% lower sequentially, a sign that its bold cost restructuring strategy was starting to pay off.

Westpac, emerging from a costly turnaround to fix outdated software and convoluted procedures, said it cut more than 4,000 jobs in the first half and spending fell 27% from the second half of 2021, putting it on the right track. track for its annual cost goal of A$8 billion by FY2024.

Cash profits fell to A$3.10 billion ($2.19 billion) for the six months to March 31 from A$3.54 billion reported a year earlier, but beat forecasts of the Visible Alpha consensus of A$2.83 billion.

Westpac declared an interim dividend of 61 Australian cents per share, up from 58 Australian cents last year.

Last week, peers National Australian Bank (NAB.AX) and Australia and New Zealand Banking Group (ANZ.AX) forecast their margins would benefit after the country’s central bank hiked rates and announced more to come. . Read more

($1 = 1.4154 Australian dollars)

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Reporting by Savyata Mishra in Bangalore; Editing by Leslie Adler and Diane Craft

Our standards: The Thomson Reuters Trust Principles.

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