Westpac books $1.8b net profit for third quarter
Westpac booked a net profit for the third quarter of $1.8 billion navigating a “modest” deterioration in bad debts, higher expenses due to inflationary pressures, and a contraction in lending margins from mortgage competition.
The third quarter net profit was flat against the average of the past two quarters. Natalie Boog
Westpac said the forces of competition in the home loan market had squeezed its core net interest margin, in an update before the market opened on Monday morning. This was 1.86 per cent for the three months to the end of June, 0.04 percentage points down on the first half. Higher interest rates were insufficient to offset more aggressive home loan pricing, the bank said.
The third quarter net profit was flat against the average of the past two quarters. The number of borrowers struggling with the higher interest rate environment is rising, with stressed assets as a proportion of total loans increasing by 0.06 percentage points to 1.16 per cent from levels in March.
The number of mortgage customers in Australia more than 90 days overdue on loan repayments rose by 0.07 percentage points to 0.80 per cent, while in New Zealand, this number was up by 0.03 percentage points to 0.32 per cent.
Inflationary pressures forced up expenses by 5 per cent compared to the first half, with the bank pointing to higher supplier costs, salaries and wages, and technology costs. It cut 2 per cent of full-time jobs over the quarter to keep a lid on costs.
Core common equity tier 1 capital, the key measure of bank strength, contracted by 0.42 per centage points to 11.9 per cent over the quarter, which reflected the payment of the interim dividend, and remains well above its target range of 11 per cent to 11.5 per cent.
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