Westpac announces $1 billion profit

Monday, 1 November 2021

Westpac says it made $1.01 billion in profit in NZ in the last financial year.

Westpac has made a profit of $1.01 billion after tax in New Zealand in the last year.

The profit was up 56 per cent on the previous year to the end of September.

Westpac increased margins on home loans, and made $5.7b of home loans, as well as reversing more than $400 million of provisions for loan defaults, which never arose.

The country’s largest bank ANZ reported a profit of $1.91b after tax last week, up 39 per cent on the previous year.

Reserve Bank governor Adrian Orr voiced concern in August about the situation recent home buyers might soon be in, and since then prices have risen rather than fallen. (Video first published August 19, 2021)

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Peter King, Westpac Group chief executive, said 2021 had been another challenging year, with a focus on continuing to support customers and employees through the pandemic.

The bank's annual report highlighted recent embarrassments for the bank in both Australia and New Zealand.

“We faced several issues, particularly, but not exclusively, risk related, that continue to detract from our reputation and performance, while also absorbing considerable management attention, time, and remediation cost,” King said.

Westpac has named Catherine McGrath as its new chief executive in New Zealand.

“These issues are not acceptable for a company of our quality and heritage.

“For example, this year we entered into an enforceable undertaking with our regulator to lift our risk governance, while the Reserve Bank of New Zealand has required us to remediate similar weaknesses in our New Zealand operations,” King said.

Simon Power, Westpac New Zealand acting chief executive, denied the bank had made a super profit despite many customers struggling in the face of ongoing restrictions imposed to fight Covid.

“We have $100b on the balance sheet, so our profit represents about a 1 per cent return on that,” Power said.

Westpac acting chief executive Simon Power denied the bank had made a super profit.

“Last time I counted we had 15 banks in the New Zealand market for five million people, so plenty of choice there.”

Depositors in Westpac’s one-year term deposits were being paid 1.75 per cent interest compared to the CPI inflation rate of 4.9 per cent.

Margins between the bank’s cost of borrowing, and the amount it was able to lend the money out had not yet returned to pre-Covid levels, Power said.

Westpac continued to be the least-loved bank in the country, its annual report showed.

Westpac remains the least-loved bank in New Zealand. Chart shows the net promoter scores of the main banks. The score reflects the proportion of customers who would recommend the bank minus the number who would not recommend the bank. Source: Westpac

Its net promoter score was 14, compared to 26, 34, 35 and 38 from the other big five banks, though none of those banks were identified by name.

The score reflects the proportion of customers who would recommend the bank minus the number who would not recommend the bank.

“We’ve been concerned to turn that around,” Power said.

The bank had invested in a brand marketing campaign to lift its profile.

“We haven’t had a sustained marketing campaign or piece of brand work like that for quite some time,” Power said.

Power said unwinding provisions for bad debt contributed to the profit rise.

However, the bank reported a profit before impairments of 1.33b, up 9 per cent. Mortgages had grown 10 per cent and customer deposits had grown 7 per cent.

Power said Westpac NZ had continued focussing on its strategy of “Fix, Simplify, Perform”.

That included the sale of the New Zealand life insurance business Westpac Life, he said.

The bank's KiwiSaver scheme increased funds under management to $9.1b, up 14 per cent on the previous year.