Westpac Banking Corp (ASX: WBC), Australia’s second-largest bank, released its half-year financial report to ASX investors this morning revealing a bump in profit and a dividend of 94 cents per share.
Here are the key headlines from the report:
- Revenue up 4% to $11.15 billion
- Profit of $4.2 billion, up 7%
- Cash profit up 6% to $4.25 billion
- A fully franked dividend of 94 cents per share was declared
- CET 1 capital ratio of 10.5%, “in line with APRA’s unquestionably strong benchmark”
Commenting on the result Westpac CEO Brian Hartzer said, “This is a good quality result built on consistent performance and a disciplined approach to growth and returns.”
Westpac signed up an additional 370,000 customers during the half year to 31 March 2018 and invested $1.3 billion to deliver new services to customers and improve its technology.
“Our businesses continue to perform solidly, with the results for the Consumer and Business banks particularly good,” Mr Hartzer added. “All businesses increased core earnings over the prior half. We are pleased that there were no one-offs, making it a clean result.”
Westpac’s net interest margin rose to 2.05% from 2.02%. The ‘NIM’, as it’s known, is important in banking because it shows the difference between interest the bank pays on its deposits versus the interest it receives by issuing loans and other forms of credit.
The CET 1 capital ratio has also been a key focus for banks in recent years thanks in part to concerns over banking stability, on a global basis, and fears of a GFC-like event in Australia. APRA, the regulator in charge of overseeing banks, wants bank capital positions to be “unquestionably strong.”
At the end of the half, Westpac said it holds enough safe capital to meet APRA’s standard.
Royal Commission
Westpac was one of the major banking and financial advice groups to be scrutinised by the Royal Commission, along with the likes of AMP Limited (ASX: AMP) and Commonwealth Bank of Australia (ASX: CBA).
“We acknowledge the significant customer and community concerns that have been raised by the Royal Commission and recognise that the process provides a critical opportunity to restore customer trust across the sector,” Mr Hartzer said.
“We have been actively seeking out instances where we’ve got it wrong, and in those cases, putting it right for the customers affected.”
Looking ahead
Looking towards the future Mr Hartzer believes Australia’s future is positive with growth of around 2.7% expected in 2018 and 2019. He said the RBA is likely to keep official interest rates on hold for some time.
“Australia is experiencing solid employment growth and continued business investment, especially in the construction sector,” Hartzer added.
“While the housing market is expected to continue to cool, this dynamic means that opportunities are opening up for first home buyers, who are beginning to step up in place of investors.”
Westpac shares were trading 2% higher at $29.68 on Monday, according to Yahoo! Finance.
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