Westpac result shows banks not out of recessionary wood yet

Westpac New Zealand more than tripled its cash earnings in the last six months as bad debts came off their peak.But the prolonged recession in this country and a weak property market dragged the half-year result down 38% or $77 million compared to the same time last year.Cash earnings of $125 million for the six months to March 31 were almost four times the $34 million earned in the previous six months but significantly lower than the $202 million it earned in the same time last year.

Westpac New Zealand more than tripled its cash earnings in the last six months as bad debts came off their peak.

But the prolonged recession in this country and a weak property market dragged the half-year result down 38% or $77 million compared to the same time last year.

Cash earnings of $125 million for the six months to March 31 were almost four times the $34 million earned in the previous six months but significantly lower than the $202 million it earned in the same time last year.

The bank’s half-year result was released this morning as part of the Westpac Group interim report, revealing a net profit for the half-year of $A2,875 million – up 32% or $700 million on the same time last year – with much of the growth also coming from a reduction in bad debts.

On this side of the Tasman, bad debts had peaked in the second half of last year and were now easing – boosting earnings in the last six months.

The bank also reported growth in mortgages (up 6%) and business lending (up 1%) as the New Zealand economy recovered.

However, as in Australia, improved growth was more than offset by higher funding costs and the decision to reduce bank fees.

Westpac said it had opened five new branches on this side of the Tasman, employing 150 new business or transaction bankers,

The bank announced an interim dividend of 65Ac a share, up 16c from the same time last year.

Westpac’s Australian chief executive Gail Kelly said the group result reflected a much improved Australian economy

Its institutional bank and wealth businesses, significantly affected by the global financial crisis, had demonstrated a rapid rebound in last half.

“The Westpac Group is emerging from the global financial crisis in a stronger position and with a sustainable platform for growth,” Ms Kelly said.

The result follows Westpac New Zealand’s foray into carbon trading this week with the launch of a broking service between forestry companies and large corporate polluters.

Westpac said it has started buying carbon offsets from New Zealand forest owners with carbon credits on their books, with plans to package them up for sale to large polluters that need to manage their liability under the emissions trading scheme.

It will be the first bank in this country to offer this service, to be managed from a Wellington-based carbon trading team.

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