Westpac NZ CEO Catherine McGrath sees good momentum, optimistic economy will start improving by end of year. Says fewer customers suffering hardship than expected

Westpac New Zealand's half-year profit rose 20% as loan impairments fell and income rose.

Figures from Westpac NZ's general disclosure statement show net profit after tax for the six months to March 31 rose $95 million, or 20%, to $562 million from $467 million in the same period of the previous financial year.

The increase came as loan impairment charges fell $131 million to $23 million from $154 million last year following severe weather events such as Cyclone Gabrielle. An overlay* for those events has since been removed. As of March 31, Westpac NZ had total loan provisions of $568 million, up from $551 million six months earlier.

Net operating income rose $76 million, or 5%, to $1.499 billion, with net interest income up $75 million, or 6%, to $1.384 billion.

Westpac NZ's operating expenses increased $75 million, or 12%, to $694 million, attributed to higher staff and technology costs, increased software amortisation costs, and wage and supplier cost increases due to inflation.

Westpac NZ says its net interest margin, the difference between what the bank borrows money at through the likes of deposits and what it lends it out at, dropped two basis points to 2.09%. Its cost to income ratio rose to 50% from 45.4%.

'Good momentum'

"We're heading into the second half of the year with good momentum and are well positioned to support further growth as the economy recovers," Westpac NZ CEO Catherine McGrath says.

She's optimistic the economy will start improving by year's end, whilst acknowledging many households and businesses are struggling with high interest rates and costs.

"We have been focused on early and proactive outreach, contacting more than 51,000 home loan customers who were due to re-fix at higher interest rates in the past six months, as well as more than 1,800 customers we identified as at most risk of financial stress," McGrath says.

"Overall, we have fewer customers suffering hardship than we'd expected, and most remain well-placed to manage ongoing cost pressures."

The ratio of Westpac NZ's home loans at least 90 days past due rose to 0.47% at March 31 from 0.33% at September 30 last year, with the rise attributed to cost of living pressures. Over the same time period, its stressed loan exposures to total lending rose six basis points to 1.55%.

Lending up 2%

Over the six months to March 31, Westpac NZ says its net lending rose 2% to $100.8 billion, with housing lending up 2% to $67.4 billion and business lending down slightly to $32.7 billion from $32.8 billion. Total deposits dropped 1% to $78.8 billion.

Westpac NZ is paying an interim dividend of $314 million, down from $326 million. Its total regulatory capital, as of March 31, stood at $10.667 billion versus its minimum requirement of $5.604 billion.

Australian parent the Westpac Banking Corporation posted a 16% drop in interim net profit after tax to A$3.342 billion. Its net interest margin fell seven basis points to 1.89%, and its return on equity dropped 228 basis points to 10.5%. Westpac's common equity tier one capital ratio rose to 12.55% from 12.28%, its interim dividend increased A5 cents per share to A70c, with an A15c special dividend also. Westpac also said it's increasing its share buy-back by A$1 billion to A$2.5 billion.

According to Westpac, Westpac NZ's market share of NZ consumer lending, business lending and deposits, were all unchanged year-on-year at March 31, at 18%, 16%, and 18%, respectively.

*Portfolio overlays are used to capture risk of increased uncertainty relating to forward-looking economic conditions.

Westpac NZ's press release is here.

The Westpac group announcement is here.

The Westpac group presentation is here.