Westpac Annual Profit Rises as Impairment Charges Decline

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--Westpac Banking Corp. (WBC.AU), one of Australia's largest banks, reported a rise in full-year earnings as mortgage lending grew and soured loans fell.

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Westpac recorded a net profit of 7.99 billion Australian dollars (US$6.11 billion) in the year through September, up 7.3% from A$7.45 billion the year before.

A rise in net interest income, as housing lending drove loan growth, helped lift revenue for the year by 3.9% to A$21.8 billion, although operating expenses increased by 1.9%, partly due to the selldown of the bank's stake in BT Investment Management Ltd. (BTT.AU) plus increased salary and rental costs.

Cash earnings--a measure tracked by analysts that strips out one-time items, treasury shares and hedge-value changes--grew by 3.1% on last year to A$8.06 billion.

"The credit quality of our loan portfolio is in great shape, with stressed assets reducing during the year," said Chief Executive Brian Hartzer, adding the bank's balance sheet had also strengthened, with capital meeting the prudential regulator's target ahead of a 2020 deadline.

The bank said impairment charges decreasing by 24% over the year to A$853 million, while stressed exposures as a percentage of total committed exposures were down 0.15 percentage point at 1.05% primarily due to a drop in large individual provisions.

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The bank's benchmark common equity Tier 1 capital ratio stood at 10.6%, against 9.5% a year earlier and ahead of the minimum 10.5% target set for the major lenders by the Australian Prudential Regulation Authority.

Still, Westpac's net interest margin, a profit measure based on the difference between the rate at which a bank borrows and lends, contracted 0.04 percentage point on the year before to 2.06%, which the bank said reflected higher funding costs and the impact of lower interest rates and treasury earnings.

Westpac said it would pay an unchanged final dividend of A$0.94 a share, for a steady full-year payout of A$1.88.

The bank, which is defending itself in federal court against allegations of market manipulation in the historical setting of an important interest-rate benchmark, on Friday agreed to sell its Hastings infrastructure-assets business to U.K. asset manager Northill Capital.

Australia & New Zealand Banking Group Ltd. (ANZ.AU) and National Australia Bank Ltd. (NAB.AU) last week agreed to settle lawsuits brought by the country's corporate regulator, which had similarly accused the lenders of rate manipulation and unconscionable conduct.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

November 05, 2017 16:19 ET (21:19 GMT)