The drop in the major bank’s net profit after tax was driven by tighter margins amid intense mortgage market competition and a rise in operating expenses.
In an ASX filing, Westpac reported a 2 per cent rise in net interest income to $9.6 billion, while operating expenses climbed 6 per cent to $5.7 billion, driven by increased investment in its Unite technology simplification program.
Mortgage lending rose 5 per cent to $485 billion, while business lending jumped 14 per cent to $106 billion, and institutional lending climbed 15 per cent to $107 billion.
The big four bank announced it will pay a 76 cents per share interim dividend, 1 cent higher than the ordinary first-half dividend last year, but below market expectations for an 80 cents per share return.
Commenting on the result, Westpac’s CEO Anthony Miller said it confirms Westpac’s strong position.
“We are growing in the areas we’re targeting and supporting customers through uncertain times. I’m pleased with the way our people have galvanised around our priorities. This first half result demonstrates our achievements and ensures we are ready for the challenges ahead,” he said.
Miller highlighted Westpac’s “very strong balance sheet” as being key given global uncertainty.
“Our capital, liquidity and deposit-based funding enable us to support our customers and our community.
“We’re managing margins actively in a competitive environment, achieving sustainable growth in our target areas. In particular, our focus on business and institutional is delivering results with Australian business lending up 14 per cent and institutional lending up 15 per cent over the year.”
He also stressed the resilience of Westpac’s customers amid ongoing cost-of-living pressures, noting that recent RBA rate cuts are providing some welcome relief.
“This resilience is reflected in the improvement in credit quality metrics indicating we may have passed the low point in the cycle. Mortgage delinquencies and impairment charges remain low,” Miller said.
Westpac’s consumer banking division posted a gain of 3 per cent on the year, achieving an interim profit of $1.09 billion, while its business and wealth division sunk 5 per cent to $1.12 billion. It’s institutional banking division surged 11 per cent to $758 million.
Reflecting on geopolitical uncertainty, Miller said it remains “a key” risk that’s as high as it has been for a very long time.
“Changes to global trade policies have impacted markets and funding for the bank. Despite the volatility, it’s important that we look through the noise and avoid reacting to the headlines. Australia is well placed to handle the instability.
“We look forward to working with the government and combining our efforts to address key challenges and opportunities, including providing more housing, guaranteeing access to cash with a sustainable long-term model and challenging ourselves as to how we compete as a nation going forward.”
However, despite Miller’s upbeat sentiment, Westpac’s share price closed nearly 3 per cent lower on Monday, dragging the ASX 200 down, as investors reacted with disappointment to the big four bank’s results.
