Westpac fattens margins as mortgage book grows

Westpac New Zealand grew its mortgage book faster than the market in the six months ended March at the same time as it fattened its profit margins.

Monday, May 8th 2023, 12:15PM

However, statutory net profit fell 33% to $426 million from $640 million in the previous first half.

The fall partly reflected profits from selling Westpac Life in the previous first half – excluding that, profit in the latest six months was down 15%.

That reflected a big increase in charges against profit for bad debts to $154 million compared with a $10 million writeback of previous charges in the year-earlier six months. The charges included provisions for Cyclone Gabrielle and other severe weather events.

Chief executive Catherine McGrath said the results also reflect the weakening economic cycle and noted there isn't clarity yet about several key issues for homeowners and businesses who were severely impacted by the weather events.

But the bank had increased customer numbers and was achieving “some really positive momentum,” McGrath said.

“We're in a stable and well-capitalised position and are well-placed to support our customers.”

She said Westpac's economists are forecasting a recession this year and the global outlook remains uncertain with funding markets “moving around.”
Inflation and consumer spending remain high, “increasing the risks of a hard landing. The rising cost of living has squeezed households and interest rates have risen quickly.”

Still, Westpac isn't yet seeing significant numbers of customers requiring hardship assistance.

The bank said its mortgage book grew 5% to $65.2 billion at March 31 from $62.2 billion a year earlier, while overall lending was up 4%.

Reserve Bank data showed mortgages sold by registered banks rose 3.5% to $341.66 billion in the same period.

Mortgages account for 66% of Westpac's lending, little changed from a year ago.

Westpac's net interest margin (NIM) rose 14 basis points to 2.10% from 1.96% in the previous first half.

However, that was less than competitors ANZ New Zealand and Bank of New Zealand's in the same six months and remains significantly below their levels.

ANZ's NIM rose 34bp to 2.67% while BNZ's was up 41bp to 2.45%.

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