Australia's Westpac posts higher annual profit, intends $976 million buyback

investing.com:

By Roushni Nair

(Reuters) -Australia's Westpac Banking (NYSE:WBK) Corp on Monday slightly missed expectations while posting a 26% rise in annual profits due to growth across its key markets, though the lender warned challenges in its operating environment would continue into fiscal 2024.

Westpac also said it had started an A$1.5 billion ($975.60 million) share buyback.

Shares in Westpac, which have been trading higher for a fourth-straight session, rose 1.7% to A$21.86 by 2328 GMT, their highest level since Sept. 18. The move tallies against a 0.4% jump in the broader benchmark.

The company joins its smaller peer Macquarie Group (OTC:MQBKY), which announced an A$2 billion share buyback on Friday, in wanting to return excess capital to investors, making the two Australian banks look more financially attractive.

The company said it had reaped the benefits of operational improvements and growth in its key markets, including deposits, mortgages and institutional banking.

A rapid surge in interest rates since May last year has benefited Australian lenders' margins significantly, however, there have been increasing uncertainties on whether interest rates will stay higher for longer and impact the bank's net interest margin.

For fiscal 2023, the company's net interest margin was up 2 basis points (bps) to 1.95% due to higher return on capital and a surge in deposit spreads, excluding certain significant items.

Westpac, however, said a tighter loan spread on the back of «intense competition» and an increase in low-returning liquid assets capped gains for its margins during the year.

In its update, Westpac flagged potential headwinds for its revenue in fiscal 2024, blaming the «lagged» effects of lending competition and a