Image sourced from Shutterstock.com

By Gareth Vaughan

Westpac New Zealand's lending contracted in the December quarter as its recent residential mortgage growth went into reverse.

Westpac's General Disclosure Statement (GDS) for the three months to December 31 shows  gross lending down NZ$222 million, or about 0.40%, to NZ$59.8 billion. In contrast the bank's deposits rose NZ$2.2 billion, or 5%, to NZ$45.5 billion with term deposits up NZ$703 million to NZ$23.8 billion.

Based on the residential mortgage loan-to-valuation ratio (LVR) table in the GDS, Westpac's home loan book fell NZ$2 million to NZ$35.891 billion. This drop came as the bank's home loans with LVRs over 90% fell but its mortgages with LVRs between 80% and 90% rose.

Ian Blair, Westpac's head of retail banking, recently said Westpac was growing ahead of market in lending with LVRs under 80%, whilst competitors were outstripping it in riskier, higher LVR lending which Westpac wasn't so keen on. Westpac's latest GDS shows it grew mortgage lending on loans with LVRs below 70%, but contracted in the 70% to 80% LVR space.

The December quarter home lending contraction continues a recent downward trend, after Westpac's grew residential mortgage lending by NZ$90 million in the September quarter, well down on its NZ$326 million June quarter growth  However, September quarter gross loans grew by NZ$661 million.

December quarter term lending figures show Westpac's business and rural lending up NZ$29 million to NZ$19.8 billion and its housing loans down NZ$8 million to NZ$35.9 billion. Its overdrafts and money market loans contracted.

Profit up 10%

Meanwhile, Westpac's unaudited December quarter profit after tax rose NZ$14 million, or 10%, to NZ$159 million from NZ$145 million in the same period of the previous year. The increase came as both net interest income and net operating income rose 11%. Net interest income rose NZ$39 million to NZ$382 million, and net operating income increased NZ$48 million to NZ$477 million.

Operating expenses rose NZ$20 million, or 10%, to NZ$220 million, and impairment charges on loans were up NZ$8 million, or 29%, to NZ$36 million. Assets at least 90 days past due were down NZ$20 million, or 12%, to NZ$164 million at December 31 from NZ$184 million at September 30. Individually impaired assets fell NZ$88 million, or 10%, to NZ$779 million.

Total assets rose NZ$1.2 billion to just over NZ$70 billion and total liabilities rose NZ$1.09 billion to NZ$64.1 billion.

From September 30 to December 31, Westpac's tier one capital ratio fell to 11.7% from 12%, and its total capital ratio dropped to 13.1% from 14.1%.

This article was first published in our email for paid subscribers. See here for more details and to subscribe.