King sees disciplined growth in first half; dividend lifted

Westpac has “managed growth and margins in a disciplined way,” according to CEO Peter King, after the company reported its first half result.  

The bank posted a net profit of $3.3 billion, down on the same period last year, but up on the previous half, as the impact of competition on mortgage margins moderated. The bank’s Net Interest Margin was 1.89 per cent , down 5 basis points on the second half of 2023, but excluding notable items, the margin was unchanged.

Net profit after tax, excluding one-off items, was $3.5 billion, down one per cent on the prior half. King said he was especially pleased with Westpac’s growth in key Australian segments, with mortgages and deposits up 5 per cent and business lending up 9 per cent over the year.

Amid a competitive banking environment and a slowing economy, King said Westpac’s balance sheet is in “good shape” and its capital position is strong.

Westpac announced an interim dividend of 75 cents per share, as well as a special dividend of 15 cents per share. It’s also increasing the current share buyback program by $1 billion to a total of $2.5 billion.

“Overall, I’m positive about the outlook and confident we will continue to deliver for customers and shareholders,” King said.

On the economic environment, the bank reported a slight rise in hardship as customers manage higher interest rates. Impairment charges were 9 basis points of loans, or $362 million, which remains low by historical standards.

“We know Australians are doing it tough as a result of higher interest rates and the cost of living and we’re helping those who need it,” King said.

“While we’ve seen an uptick in stress in our loan books, this is to be expected given the large increase in interest rates and inflation. We remain appropriately provisioned and with a strong balance sheet, are in a good position to help customers.”

Westpac’s result reveals an increase in customers who are ahead on their mortgage repayments to 77 per cent, while offset account balances have also risen by $3 billion to $60 billion.

King said the Australian economy is “resilient”.

“We believe the economy is on track for a soft landing and, if this happens, this will be good news for most Australians.

“However, this scenario is not certain. While inflation has fallen, getting it down to target range is proving difficult globally and here in Australia. It is likely interest rates will stay higher for longer.”

Westpac has reached a critical milestone in its risk transformation with the completion of its Integrated Plan to improve risk management. Independently reviewed by Promontory Australia, the 354 activities were completed as part of Westpac’s Customer Outcomes and Risk Excellence program.

In its final report, released today, Promontory noted the bank’s risk management is “substantially improved”.

“The depth of change to the organisation, both structurally and culturally, means Westpac is now a simpler, stronger bank,” Promontory said.

King said Westpac is now focused on transition and embedding the changes implemented under the Integrated Plan. 

Westpac is also embarking on technology simplification program UNITE, while investing in services for customers.

“Our Westpac app is rated the best in Australia, we reduced mortgage and business lending approval times and upgraded merchant payment services for business customers,” King said.

Westpac is well positioned for the future, he added.

“We’re firmly focused on our customers and continuing our contribution to the nation’s economic wellbeing.”