Westpac has posted a net profit after tax (NPAT) of $6.99 billion for the financial year ended 30 September, a decrease of 3 per cent on the previous financial year.
In its full-year results released on Monday, Westpac reported that the decrease was reflected in lower income and higher expenses, partly offset by a decrease in credit impairment charges.
The big four bank also clarified last month that its NPAT would be impacted by some $123 million due to notable items, which are solely related to “unrealised fair value gains and losses on economic hedges and net ineffectiveness on qualifying hedges, which reverse over time”.
Moreover, return on average ordinary equity slumped 32 basis points (bps) to 9.77 per cent, while earnings per ordinary share decreased by 2 per cent to 201 cents.
However, outgoing chief executive Peter King said that Westpac has “significantly” improved its customer service, grown in key segments, and delivered a financial result built on a solid balance sheet and capital position.
“We’ve continued to manage margins well in a competitive environment while growing in line with system in loans and deposits,” King said.
Namely, Westpac’s group net interest margin (NIM) fell by 2 bps to 1.93 per cent, while core NIM decreased 4 bps to 1.82 per cent.
The bank said that the modest contraction in NIM came from competition for mortgages and customers preferencing higher yield deposits, which “more than offset” the benefits from higher earnings on capital and hedged deposits, in addition to a larger contribution from Treasury.
Moreover, net interest income increased by 2 per cent to $18.75 billion driven by growth in average interest earning assets of 3 per cent, which was tempered by the contraction in NIM.
Meanwhile, operating expenses moved up 2 per cent per cent to $10.64 billion, with key movements including a $279 million increase in amortisation and impairment of software assets, a $136 million increase in technology services expenses, but offset by $199 million in reduced employee costs.
“The rise in operating expenses reflected higher technology costs and inflationary pressures,” the bank explained.
According to King, the bank’s balance sheet is “one of the strongest I’ve seen”, with a CET1 capital ratio of 12.5 per cent, up 11 bps on FY23.
“In addition, fully franked ordinary dividends increased by 6 per cent this year with a final dividend of 76 cents per share. Total ordinary dividends for the year were 151 cents per share, towards the upper end of our payout range,” the CEO added.
During the period, Westpac was also able to announce a total of $2 billion of share buybacks.
King continued: “The consumer division built momentum in the second half and performance in business has been a standout.”
Namely, net profit for the consumer segment decreased 17 per cent, while net loans increased 4 per cent and deposits grew 8 per cent. However, financial performance recovered in the second half with net profit up 6 per cent.
For the bank’s business and wealth segment, net profit grew 13 per cent with pre-provision profit up 9 per cent.
Moreover, net loans rose 7 per cent with business lending increasing by 9 per cent due to “strong growth in our target industries of agriculture, health and professional services”.
Net profit was up 10 per cent in Westpac’s New Zealand business, with non-provisional profit seeing a 1 per cent rise.
Looking forward, King said the domestic economy is showing positive signs heading into 2025.
“However, we recognise some customers are facing difficult choices. While the majority are
showing resilience, we’re well-positioned to provide support to those who need it,” the outgoing CEO said.
“Some central banks have shifted to an easing cycle and the RBA is likely to follow in 2025. This will be good news for many households and businesses. Combined with an undersupply of housing, population growth and limited spare capacity across much of the business sector, we expect solid demand for both housing and business credit in 2025.”
“The impact of overseas elections and geopolitical uncertainty remain difficult to predict and therefore it makes sense to maintain a strong balance sheet,” King concluded.
