Westpac reported net profit of A$3.34 billion for the six months to March 2024 – a fall of 18 per cent compared with earnings of $4 billion in the March half last year. The result was a 5 per cent improvement on the September half last year, when the bank reported net profit of $3.19 billion. Westpac no longer reports cash earnings.
Income: Net interest income of $9.1 billion was unchanged from the previous corresponding period and down 1 per cent from the September half last year. Net operating income of $10.6 billion was down 4 per cent year-on-year and flat half-on-half.
Expenses and cost to income: Operating expenses of $5.4 billion were up 8 per cent from $4.9 billion in the previous corresponding period, but down 5 per cent from $5.7 billion in the September half. The half-on-half fall of 5 per cent was the result of notable items. Excluding these items, expenses were up 3 per cent half-on-half. The cost to income ratio was 50.9 per cent – up from 45.3 per cent in the previous corresponding period.
Impairment expense: The bank booked $362 million of impairment charges, which was 7 per cent lower than the $390 million charge in the March half last year but 40 per cent higher than the $258 million charge in the September half. The charge included $213 million of individually assessed provisions – a threefold increase from $76 million in the previous corresponding period. Impairment charges to average loans was 9 basis points, compared with 10 bps in the March half last year and 7 bps in the September half.
Credit quality: The proportion of mortgages past due by 90 days or more was 1 per cent, compared with 68 bps in the March half last year and 81 bps in the September half. Consumer loan delinquencies were 1.4 per cent, compared with 1.54 per cent in the March half last year and 1.28 per cent in the September half. Total stressed exposures as a percentage of total committed exposures was 1.36 per cent, compared with 1.1 per cent in the March half last year and 1.26 per cent in the September half.
Margin: The group’s net interest margin has fallen from 1.96 per cent in the March half last year to 1.94 per cent in the September half and to 1.89 per cent in the latest half.
Return on equity: ROE fell from 11.3 per cent in the March half last year to 8.9 per cent in the September half and then picked up to 9.3 per cent in the latest half.
Earnings per share: EPS was 95.6 cents a share – down from 114.2 cents a share in the previous corresponding period.
Dividend: The bank declared a fully franked interim dividend of 75 cents a share – up from 72 cents and 70 cents in the previous halves. It also declared a fully franked special dividend of 15 cents a share. The dividend payout ratio has jumped from 61.3 per cent in the March half last year to 77.9 per cent in the latest half, which is above the target payout range of 65 to 75 per cent. The bank said the payment of the special dividend reflected its strong capital position and its large franking credit balance.
The divisions: Business and wealth took over from consumer during the half as the bank’s biggest profit generator, with a profit of $1.14 billion – up 20 per cent from $953 million in the September half last year. The consumer banking division’s profit fell 3 per cent half-on-half at $1.08 billion. Westpac institutional bank was up 7 per cent to $689 million. New Zealand fell 11 per cent to $477 million.
Loans and deposits: The Australian housing loan book grew 5 per cent year-on-year to $495.1 billion. The business loan book grew 9 per cent to $181.9 billion. Westpac chief executive Peter King said the bank is looking to grow Australian mortgage at around system, while it aims for stronger growth in higher margin business and institutional lending. Customer deposits grew 4 per cent to $650.9 billion.
Market share: Australian mortgage share was steady at 21 per cent, and business credit share was steady at 15 per cent. Household deposit share grew 1 percentage point to 21 per cent and business deposit share was steady at 18 per cent. In New Zealand, mortgage share increase a little to 21 per cent, business credit share fell a little to 14 per cent and deposit share was steady at 19 per cent.
Capital: The common equity tier 1 capital ratio is 12.55 per cent, compared with 12.28 per cent in the March half last year and 12.38 per cent in the September half. The target operating range is 11 to 11.5 per cent and the bank has around $4.7 billion of capital above the top of the target range. The bank has increased its $1.5 billion share buyback, which is 59 per cent completed, by an additional $1 billion. On a pro forma basis, assuming the buyback is completed and dividends paid, the CET1 ratio falls to 12.06 per cent.
Funding and liquidity: The bank has $784.8 billion of loans on its balance sheet – up 5 per cent over the previous corresponding period. It has customer deposits of $650.9 billion – up 4 per cent year-on-year. The deposit to loan ratio is 82.9 per cent. The net stable funding ratio is 114 per cent and the liquidity coverage ratio is 132 per cent. The bank raised $19.8 billion of new long-term wholesale funding during the half.
Customer remediation: There was no provision for remediation, fines and litigation during the half.
Staffing and branches: Staff number fell 8 per cent from 38,503 full time equivalents to 35,348 over 12 months. Australian branch numbers were cut by 4 per cent over the past 12 months to 637. New Zealand branch numbers are down by two to 112.