Westpac has tipped the country’s housing market to cool but not crash as it unveiled an $4.017 billion cash profit for the first half of the financial year.
The profit result was up 3 per cent of the year in line with the 3 per cent lift in revenue $10.77 billion.
Brian Hartzer, chief executive officer of Westpac. Photo: Bloomberg
“This is a solid result given the current complex operating environment,” Westpac chief executive Brian Harrtzer said.
“We have been disciplined in balancing growth and returns with cash earnings up 3 per ent over both the previous half and the same period last year.”
IG Markets’ Chris Weston said expectations were for a $4.021 billion profit. although the bank did match prediction of 94 cent dividend and a 14 per cent returns on equity.
Mr Hartzer sounded a positive note on the economic outlook saying the bank expected slightly above trend at 3 per cent.
Although he noted that could be mixed across the country.
“We remain positive about the Australian housing market, although we expect price growth to moderate through 2017,” he said.
“2017 financial system credit is expected to grow at around 5.5 per cent. Housing credit growth is likely to ease a little as demand slows.”
Customers more than 90 days before on their loans remained low by historical standards and 70 per cent of the bank’s customers were ahead on their repayments, he said.
Both those banks played up a focus on costs in their results as margins were crunched and growth hard to find and Mr Hartzer did likewise in a statement to the ASX on Monday morning.
The bank flagged that its expenses were up just 1 per cent for the half well ahead of its goal to keep cost increases between 2 and 3 per cent.
“Our consumer and business banks continued to grow in targeted areas but margins were affected by higher funding costs,” he said.
“The benefits of our strategy are also clear in this result. We’ve digitised more processes which is improving service for customers while also bringing costs down.”
The bank’s net interest margin reduced to 2.07 per cent in the face of what it described as a “sharp” increase in its funding costs.
The consumer bank provided the bulk of earnings for the half ($1.5 billion, up 5 per cent compared to the same half last year) while the institutional bank was the fastest growing ($700 million in earnings, up 34 per cent compared to lage year).
The banks posted 6 per cent loan growth in its consumer bank, 3 per cent in its business bank and 7 per cent in its New Zealand operation.But the institutional bank went backwards by 5 per cent.
More to come