Westpac Lifts H1 Profit 3%

Westpac (WBC) has lifted interim dividend 1%, or one cent, to 94 cents after reporting a modest 3% rise in cash earnings for the half year to March 31.

Westpac said cash earnings rose to $3.904 billion, on a 5% rise in group revenue to $10.47 billion for the latest six month period.

The bank is the first of four major banks to report their latest financials this week – ANZ is tomorrow, the NAB on Thursday (both interims), while Macquarie releases its full year figures on Friday.

The higher dividend is despite a sharp slide in the bank’s cherished return on equity figure to 14.2%, down 166 basis points, and well under the previously stated long term target of 15%.

Westpac said its cost to income ratio dipped to 43.6 cents in the dollar from 44.11 cents a year ago,a move which helped boost the bottom line.

Westpac said out that its institutional bank suffered from lower rates and weak earnings, and “our large exposures” which “added $252 million to provisions.

Impairment charges jumped 96% from the March quarter of last year to $667 million in the six months to last March, a rise that will attract the attention of investors today. It was also up 62% from the September, 2015 second half.

But the biggest eye opener on a first reading of the report was the rise of 3 points in the bank’s net interest margin in the latest half year to 2.09 cents in the dollar, up from 2.06 cents a year ago.

Obviously sticking up mortgage and investor home lending rates, without any rise in the Reserve Bank’s cash rates, has paid off, and will no doubt help the ANZ and NAB.

In this morning’s announcement, Westpac Brian Hartzer said the bank had “recorded sound balance sheet growth” and would continue to “focus on controlling costs and delivering sustainable returns”.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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