Westpac profits up 4%, bad debts rise
· RNZWestpac New Zealand's first half profit is up 4 percent on the year earlier, though bad debts are on the rise.
The bank made a net profit of $545 million for the six months ended March, and while that was up on the year earlier it was down 19 percent on the six months earlier, ended in September.
Westpac's bottom line included a provision of $37m for bad debts, compared with $33m the year earlier.
Chief executive Catherine McGrath said conditions were set to get worse with Westpac economists expecting the economy to shrink by 0.4 percent in the June quarter, with unemployment to peak at 5.6 percent and inflation to reach 4.5 percent.
Key numbers for the six months ended March compared with a year ago:
- Net profit $545m vs $525m
- Net operating income $1.56b vs $1.5b
- Expenses $760m vs $734m
- Net interest margin 2.29% vs 2.26%
- Net impairment charge $37m vs $33m
McGrath said total lending rose 6 percent and deposits by 3 percent over the year earlier, despite strong competition.
"We've grown faster than the market in home and small-to-medium business lending as we compete hard to help more customers into their own homes, grow their businesses and support New Zealand's economic recovery," McGrath said.
"Our Westpac KiwiSaver funds are also producing strong returns, with six out of eight in the top quartile among peers for the 12 months to 31 March, and all funds above their peer median over the last two years."
She said Westpac had consistently grown its lending to small and medium-sized businesses faster than the market over the past two years.
"In October we made a $100m lending commitment to help businesses start up or scale up, of which we've lent more than $33m to date.
"We're also reaching out to small businesses we've identified through our credit process as having more 'headroom' to borrow without needing to go through a full application - providing easier funding when they need it, with less red tape."
She said economic conditions were challenging for consumers and business, with uncertainty pushing out the timeline for an economic recovery.
"More broadly, before the conflict in the Middle East, New Zealand's economy had been slowly gathering momentum. While the conflict is set to push GDP growth backwards in the near term, we think the economy will pick up again when there is a resolution to the conflict and oil prices then gradually ease.
"We know the last couple of months have been unsettling for households and businesses exposed to higher costs, especially in the transport, manufacturing and agriculture sector, as well as those who rely on cars.
"We're proactively contacting businesses most exposed to higher fuel costs and are helping them manage the impact."
Households adapting to crisis
McGrath said a recent survey indicates households were adapting despite widespread cost pressure concerns.
Nearly two-thirds of Westpac's home loan customers were more than three months ahead on their repayments at the end of March, up slightly on six months ago. The median customer was 10.6 months ahead.
"Rising prices are clearly weighing on Kiwis' minds, but what's encouraging is they're so far adapting well and making a plan to get through it," she said.
Many households were cutting back on non-essential spending.
"However, we know that the strain on many households will increase the longer the disruptions caused by the conflict drag on, and we're monitoring this closely," she said.
"If you're at the point where you're worried about how you'll make ends meet, the best thing you can do is call your bank. The sooner we're aware of potential issues, the sooner we can help you make a plan to get back on track."
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