Australia's Westpac cash profit rise 3% to a record

[SYDNEY] Westpac Banking Corp, Australia's No.3 lender by assets, on Monday posted a 3 per cent rise in annual cash profit to a record A$7.8 billion (S$7.8 billion) helped by growth in mortgages.

Last month, Westpac pre-released its earnings as it raised A$3.5 billion to meet new stricter capital rules and became the first lender to push home loan rates higher to protect profits.

Australia's four major banks are preparing for their slowest earnings growth since the global financial crisis amid record low interest rates and a cooling economy. Bad debt charges are ticking up even as regulators demand more cash be set aside against loan books.

Westpac CEO Brian Hartzer expects "Australian banks to continue to operate in a lower-for-longer environment with modest credit growth, intense competition and ongoing regulatory uncertainty."

The caution comes even as Westpac unveiled its best final dividend ever of 94 cents, taking the total annual payout to 187 cents a share, up 3 per cent.

Hartzer, however, expects a pick-up in business credit and growth in wealth and insurance markets to help bank earnings, going forward.

Net interest income, the difference of interest earned and paid out, rose 6 percent for the year-ended Sept 30 while net interest margin, a key gauge of profitability, was flat at 2.09 per cent.

Loan impairment charges rose 16 per cent on higher write-offs and as the benefit from credit quality improvement reduced.

Operating expenses jumped 11 per cent for the year led by technology investment and foreign currency impact as the Australian dollar depreciated some 13 per cent this year.

National Australia Bank and ANZ Banking Corp both missed expectations when they posted record cash profits last month. Commonwealth Bank of Australia follows a June-ending calendar year.

The four have together raised over A$20 billion since May to comply with onerous capital rules.

Bank shares have underperformed so far this year as the fund raisings have diluted average returns to shareholders and on concerns about future earnings growth. Westpac shares are down about 5 per cent this year to Friday's close compared with a 3 per cent drop in the broader index.

REUTERS