Major releases “disappointing” half year results

Remediation aside, CEO attributes lacklustre figures to “very competitive, low growth environment”

Major releases “disappointing” half year results


By Madison Utley

A major bank has released its half year results, revealing a 24% decline in statutory net profits and a 22% drop in cash earnings from the year before.

Westpac Group CEO Brian Hartzer said, “This is a disappointing result reflecting weaker business conditions and the bank dealing decisively with outstanding issues, including remediation and resetting our wealth strategy.”

This half, $896m pre-tax was spent towards customer remediation.

“The remediation provisions reflect a number of areas where we made mistakes and didn’t meet our standards or documentation requirements. It shouldn't have happened. We need to do better. And we will,” promised the CEO.

Loan growth was “modest,” and mostly arose from the New Zealand division.

Australian mortgages grew by 1%, all of which stemmed from the owner-occupied book. Interest-only remained flat at 31% of the portfolio.

According to Hartzer, “The credit quality of our loan book is sound, with the proportion of stressed exposures up one basis point on the year. Impairments remain at cyclical lows and 69% of Australian mortgage customers are ahead on their repayments.”

That said, 90-day delinquencies are up 10bps over the half.

In its announcement, the bank also drew attention to its new Customer Service Hub which enables mortgages to be originated online, reducing the cost and time of approval.

This is likely a response to the “aggressive growth” evidenced in foreign banks and non-banks addressed by Peter King, CFO at Westpac. King questioned whether the playing field is level.

“Non-banks don't have the same regulations applied to them as the ADIs do,” he explained.

“Our sense is that the regulators have focused initially on the big four banks – understandably, as we’re a large part of the volume – but based on the feedback we get from brokers and others, that’s led to some disconnect in terms of the processes being required by the large banks versus the processes being required by smaller banks.”

Moving forward, the Westpac CEO has expressed he expects “the second half to continue to be challenging.”

“In an environment where regulatory activity is intense, economic growth has slowed, consumer and business demands have softened, house prices have fallen, and competition has increased – all of this has put pressure on earnings, and given us a list of issues to manage,” Hartzer concluded.

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