Westpac profit rises 22pc to $707m
Westpac New Zealand overcame intense competition in the banking sector and a subdued lending environment to rake in a $707 million after-tax profit for the 2012 financial year.
The Australian-owned lender is the last major bank to report its full-year results, bringing the collective profits of the "big four" to a staggering $3.4 billion.
Westpac's NZ profits surged 22 per cent in the year till September 30, largely driven by a chunky $50m reduction in bad debts and strong balance sheet growth.
The other key driver was an increasing net interest margin, which represents the difference between the cost of funding and the loans on issue.
Westpac's margin crept from 2.64 per cent to 2.72 per cent over the course of the year, and it is leading the pack among the big banks.
It was also 25 per cent higher than the average 2.17 per cent earned by its Australian parent.
"We're completely comfortable with the level of our net interest margin, although I don't see it expanding significantly in the coming few years," said Westpac NZ chief executive Peter Clare.
Westpac's standard floating mortgage interest rate has consistently sat about half a per cent higher than its main rivals.
"We don't aim to be the cheapest in the market - that's not Westpac's brand positioning," Clare said.
Instead, the focus was on good service, loyalty, and links to the local community.
Massey University banking expert Claire Matthews said the bank's net interest margin was on "the high side", but indicated that it was managing its business well.
She said there was nothing particularly noteworthy about the "good, healthy, profits". "They're the standard sort of financial results that basically you'd really want to see from a bank."
Westpac grew its mortgage book by 3 per cent.
It also grew business lending by 4 per cent, contributing to a 7 per cent rise in operating income.
Clare said the growth in lending had been fully supported by a drive for deposits, which increased 11 per cent to $42 billion.
All the major banks have pushed to increase retail deposits to reduce their reliance on wholesale funding overseas, which is volatile and often more expensive.
Westpac's solid performance triggered the bank workers' union FIRST to say it should pay its staff higher wages.
"Westpac staff know that they have a real value to the bank and their customers and that they're worth more; they also know that the bank can afford to pay more," said finance secretary Andrew Casidy.
The union is working on a collective agreement with Westpac.
Westpac's Australian parent reported a net profit of A$5.97b (NZ$7.49b), down 15 per cent.
But after accounting for a one- off tax consolidation that had inflated last year's result, profit was up 5 per cent, exceeding analysts' expectations.
Westpac is dual-listed on the Australian and New Zealand stock exchanges, where it closed up 1 per cent at $31.85.
- © Fairfax NZ News
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