In an ASX update on Monday, the big four bank said its CET1 capital ratio — a measure of spare cash — dropped to 10.75 per cent at the end of June from 11.33 per cent at the end of March.
This, Westpac explained, was due to payment of the 2022 interim dividend and an increase in interest rate risk in the banking book risk-weighted assets (RWA) following interest rate hiked over the quarter.
The Reserve Bank of Australia (RBA) has substantially hiked rates since May, taking the official cash rate to 1.85 per cent earlier this month.
With inflation sitting at a post-GST high of 6.1 per cent and unemployment at a near 50-year low of 3.5 per cent, the RBA has hiked rates for four months in a row. This has inevitably impacted Australia’s biggest banks.
According to Westpac’s latest brief update, the proportion of stressed loans compared to total loans stood at 1.06 per cent compared to 1.10 in the March quarter. The number of mortgages more than 90 days overdue also declined to 0.83 per cent in Australia, down 0.05 percentage points.
Consumer finance delinquencies however, edged up slightly to 1.76 per cent.
The big bank did not report any details on its revenue or cash profit for the quarter.
In May, Westpac reported cash earnings of $3.1 billion in the first half of 2022; a 71 per cent increase on the prior corresponding period (pcp).
However, addressing the 12 per cent decline in cash earnings over the year, Westpac CEO Peter King attributed the drop to “competitive pressures on net interest margins and returning to an impairment charge after having benefits last year”.
“I’m pleased with our progress on costs which are down 27 per cent, or 10 per cent excluding notable items, compared to the second half of 2021,” Mr King said.
Statutory net profit also surged on pcp by 63 per cent to reach $3.28 billion, but fell 5 per cent on year-on-year basis.
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
