Westpac profit meets estimates on rising rates, cost cutting

WESTPAC Banking Corp's profit came in line with analyst estimates as rising interest rates and further cost reductions supported profitability.

Cash earnings dipped to A$5.28 billion (SS$4.8 billion) in the year to Sept 30, according to a statement from the Sydney-based lender Monday. That met the average expectation of A$5.25 billion in a Bloomberg survey of 12 analysts.

Australia's biggest banks are reaping the rewards of higher interest rates, part of a global trend of higher borrowing costs that's bolstered lending profitability.

Still, with the economy expected to slow next year and fears around an accelerating downturn in the property market, investors are on the lookout for signs of stress for households that could weigh on the outlook for banks.

"After the work of the past two years, Westpac is now a simpler, stronger bank," Westpac chief executive officer Peter King said in the statement. "We're continuing to get our costs down."

While mortgage rates are rising fast this year, there's little sign yet of pain for borrowers, though next year will likely see fixed-term home loans mature and the impact of higher rates more acutely felt, King said. "We are not yet seeing increases in hardship or stressed assets," he said.

"Many customers built up savings during the past two years and 68 per cent remain ahead on their mortgage repayments. However, it is inevitable that the impact of higher rates will be felt, including when borrowers' low fixed-rate loans are rolled over."

Cost cuts

Westpac revised its cost target to A$8.6 billion for 2024 and said costs in the first half of 2023 are expected to be 0 per cent to 2 per cent lower.

As part of CEO King's efforts to simplify the bank, Westpac has completed or announced the sale of nine businesses, according to the statement.

The firm will pay a final dividend of 64 Australian cents per share.

Rival National Australia Bank is expected to release results on Wednesday, while Australia & New Zealand Banking Group began the earnings season for the biggest lenders last month. BLOOMBERG

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