Westpac posts 10% rise in profit, topping a billion dollars

Monday, 4 November 2024

Westpac has announced an increase in after-tax profit as it prepares to appear before MPs in Parliament’s banking inquiry.

Westpac New Zealand’s after-tax profit has risen 10% to $1.05 billion on the back of a large increase in the interest paid to it by borrowers, and a fattening of its margins.

Last year the bank recorded a profit of $963 million.

In the 12 months to the end of September, Westpac collected $7.4b in interest, compared to $6.2b last year, though interest rates on home loans and business loans have begun to fall.

Westpac chief executive Catherine McGrath said the bank had “acted swiftly to pass falling interest rates on to customers”.

However, while households and businesses paid dearly for their loans, depositors and other funders of the bank fared better than last year, earning $4.7b in interest compared to $3.6b last year.

MPs have been holding a select committee banking inquiry examining things like bank profits, their willingness to lend to farmers, and executive pay.

Westpac's Economic Overview suggests a brighter future for New Zealand, projecting over 2% growth in 2025. With mortgage rates falling, an 8% rise in house prices is anticipated as investors return to the property market.

McGrath will appear before the select committee on November 20, the second big bank boss to do so following ANZ’s Antonia Watson on October 23.

McGrath’s “statutory” remuneration was A$2.2m, up from A$1.9m in the previous year.

Westpac’s result was boosted by the unwinding of some impairments for expected loan losses, however, the cost of running the bank rose as a result of general inflation, wage inflation and spending on technology.

There were indications that some households continued so struggle with their loans.

At the end of September, borrowers with $1.6b of home loans were behind in their payments, with $283m behind by more than 90 days.

The bank had managed to grow its loan book during the year.

“Over the year we grew our home lending by 3% and business lending by 2% in a highly-competitive environment,” McGrath said.

“In particular, our business lending was well above system growth in the second half of the year, and we increased our face-to-face interactions with business, corporate and agri customers by 65% to better understand their needs and help them to reach their goals,” she said.

Catherine McGrath, chief executive of Westpac in New Zealand.

“We helped first buyers purchase nearly 5900 new homes, and have seen a noticeable increase in applications in recent months as consumer confidence grows.”

There was mortgage relief on the way for many of the bank’s borrowers.

“We estimate by the end of the year that more than a quarter of our fixed home loan customers will have rolled onto lower rates, and nearly three-quarters by this time next year,” McGrath said.

Banks have been forced to invest more to protect customers from scams, and McGrath reported success in bringing down losses.

“Customer losses to fraud and scams were down over the year despite a 12% rise in reported cases, thanks to higher prevention and recovery rates. Of every $10 of known fraud and scams that touched our systems, we prevented, recovered or reimbursed $9,” she said.

She reiterated recent comments by ASB chief executive Vittoria Shortt for social media companies to play their part in reducing scams.

“We want to see social media companies like Meta and big tech platforms like Google act faster to flag and remove scam content, to help stop scams at their source,” she said.