Westpac posts A$4 billion profit for first six months, NZ profit up 2% video

RNZ

Westpac Bank New Zealand's first half profit fell, as competition for deposits and a higher cost of funds drove down revenue.

People with money to deposit with a bank are now in the driver's seat, Westpac's chief executive said as it reported a $462 million profit for the first six months of the year.

As a group, the Australian-based bank reported a A$4.017 billion (NZ$4.31 billion) cash profit for the first half of the financial year. 

In New Zealand, lending growth of 7 per cent, including home lending growth of 6 per cent, was supported by term deposit growth of 11 per cent with overall deposit growth of 3 per cent.  The New Zealand profit was up 2 per cent, year-on-year.

"This is a solid result given the current complex operating environment," CEO Brian Hartzer said.
MYTCHALL BRANSGROVE/FAIRFAX NZ

"This is a solid result given the current complex operating environment," CEO Brian Hartzer said.

Westpac New Zealand chief executive David McLean said the bank was maintaining its focus on quality lending and targeted growth in a challenging environment with increased pressure on deposit and wholesale funding margins.

READ MORE:
ANZ first-half profit jumps 24 per cent
BNZ profit falls, bank warns lending will get more expensive

"We are seeing growth in positive sentiment and market share in key segments. Westpac New Zealand's campaign to support first-home buyers through the re-launch of our HomeSaver offering aligns with a steady increase in withdrawals from the Westpac KiwiSaver Scheme by first-home buyers."

McLean said the bank was not worried about the housing market.  A recent slowdown was the result of a number of factors, he said, including signals that interest rates will slowly rise and that the Reserve Bank may introduce debt-to-income ratios.

He said whether the change was permanent or just a breather remained to be seen. McLean said a more significant downturn was unlikely because supply-and-demand imbalances were still causing pressure. 

But those hoping to pit the banks against each other for the best home loan deal could be disappointed.

McLean said banks had been competing hard for deposits, realising the benefits in sourcing money from New Zealand depositors rather than relying on offshore funding, he said.

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"The competitive environment has moved a bit away from lending to deposits," he said.

That meant the margin being paid to people with money in the bank was improving, he said.

Funds in the Westpac KiwiSaver scheme have increased 20 per cent in the past year. The average balance is up from $5800 in December 2012 to $11,400 in December 2016.

"Our customer-centric strategy is coming to life with reduced banking fees, one of several changes that have contributed to an 18 per cent drop in customer complaints compared to the same period last year."

McLean said the bank had set out to identify the root cause of complaints and had determined that many customers did not understand the fees they were paying, or the value they received in return.

Fees were reviewed across the board, to ensure they were fair and transparent, he said.  Many had dropped over the half-year.  "Dozens of fees have been cut or capped." 

"This is a solid result given the current complex operating environment," Westpac's group chief executive Brian Hartzer said.

"We have been disciplined in balancing growth and returns with cash earnings up 3 per ent over both the previous half and the same period last year."

IG Markets' Chris Weston said expectations were for a A$4.021b profit. although the bank did match prediction of 94 cent dividend and a 14 per cent returns on equity.

The result came after ANZ posted a A$3.4b profit last week and National Australia Bank, owner of BNZ, announced a A$3.29b profit a few days later.

Both those banks played up a focus on costs in their results as margins were crunched and growth hard to find and Hartzer did likewise in a statement to the ASX on Monday morning.

"Our consumer and business banks continued to grow in targeted areas but margins were affected by higher funding costs," he said.

"The benefits of our strategy are also clear in this result. We've digitised more processes which is improving service for customers while also bringing costs down."

 - Sydney Morning Herald

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