WBC H1 profit soars as economy strengthens

Westpac has posted a rebound in earnings from a year ago as an improved economic outlook boosted loan activity in its key mortgage business.

Australia’s second-largest lender on Monday reported first-half cash earnings, which strip out items like hedging impacts and one-off events, more than trebled to $3.5 billion after it wound back some provisions to cover potential loan losses.

Statutory net profit for the six months to March 31 was 189 per cent higher at $3.4 billion, after a challenging period in 2020 due to the COVID-19 pandemic.

“It has been a promising start to the year with increased cash earning, growth in mortgage and continued balance sheet strength,” CEO Peter King said.

“While the economic outlook is more positive there is still some uncertainty.”

Westpac had posted a slump in earnings for the same period last year, mainly due to hefty impairment charges related to the pandemic.

But the domestic economy is now rebounding, with falling unemployment and consumer sentiment at its strongest level in more than a decade.

“Businesses are positive, with most industries responding to the brisk rebound in activity and the winding of COVID-19 restrictions,” Mr King said.

He expects the Australian economy to expand by 4.5 per cent in 2021.

Westpac said lending for housing had surged and its Australian mortgage book expanded by $2.6 billion in the six month period, even though growth in owner-occupier loans partly offset by lower lending to investors.

Owner-occupier loans rose by three per cent, with first home buyers making up 13 per cent of new loans.

“While we expect continued increases in home prices, as the supply of houses increases, the rate of house price growth will likely moderate,” Mr King said.

The lender on Monday also outlined a three-year plan to cut costs by more than $2 billion by divesting non-core businesses and ramping up digital offerings.

Meanwhile, the bank announced its New Zealand chief executive David McLean, would retire after more than 20 years with the group.

Westpac will pay an interim dividend of 58 cents a share after scrapping payouts a year ago in response to the pandemic. It had paid a modest 31 cents in the second half of the last financial year.

WESTPAC HY PROFIT SURGES

* Revenue up 1.0pct to $10.69b

* Cash profit up 256pct to $3.5b

* Statutory profit up 189pct to $3.4b

* Fully-franked interim dividend 58c vs NIL

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