Westpac Australia’s first-half cash profit drops 12% as competition bites

A woman walks out of the ground floor of an office building with the Westpac logo amid the easing of coronavirus disease (COVID-19) restrictions in the central business district of Sydney, Australia, on 3 June 2020. Picture taken June 3, 2020. REUTERS/ Loren Elliott

May 9 (Reuters) – Australia’s Westpac Banking Corp reported a more than 12% drop in first-half cash profits on Monday as margins continued to be squeezed by fierce industry competition mortgage loans in an environment of historically low interest rates and certain impairment charges.

Australia’s “big four” banks have seen a housing loan boom, helped by low rates and a pandemic-fueled shift to remote working that has boosted property markets. But their margins have suffered from competition and the shift of borrowers to fixed rate loans.

Westpac, which is also emerging from a costly turnaround to fix outdated software and convoluted procedures, said net interest margin – a key indicator of profitability – fell 15 basis points to 1.91% in the first semester. Read more

It recorded an impairment charge of A$139 million as the bank made provisions for bad debt due to weather-related risks in Australia as well as wider global uncertainties.

The country’s third-biggest bank reported cash profits of 3.10 billion Australian dollars ($2.19 billion) for the six months to March 31, up from 3.54 billion Australian dollars last year, but exceeded the Visible Alpha consensus forecast of A$2.83 billion.

Last week, peers National Australian Bank (NAB.AX) and Australia and New Zealand Banking Group (ANZ.AX) forecast their margins would benefit after the country’s central bank hiked rates and signaled more to come . Read more

Westpac declared a dividend of 61 Australian cents per share, up from 58 Australian cents last year.

($1 = 1.4154 Australian dollars)

Reporting by Savyata Mishra in Bangalore; Editing by Leslie Adler and Diane Craft

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