Westpac New Zealand's annual profit is down 43% thanks to a COVID-19 related surge in loan impairment charges, and as expenses rose and income fell.
Westpac NZ's September year net profit after tax fell $414 million, or 43%, to $550 million from $964 million last year.
The fall came as the bank's impairment charge jumped to $320 million versus a net impairment benefit of $10 million last year. Meanwhile, net operating income fell $133 million, or 6%, to $2.282 billion, with net interest income down $24 million, or 1%, to $1.943 billion. Operating expenses climbed $66 million, or 7%, to $1.059 billion.
"We've provisioned for an increase in expected lending losses due to changing economic conditions, largely driven by COVID-19. However, our underlying asset quality remains strong," Westpac NZ CEO David McLean says.
McLean says Westpac NZ has provided mortgage and loan repayment assistance to 21,959 customers, and more than $9 billion of new and restructured business lending. Australian parent Westpac Banking Corporation said as of October 19, 74% of deferred NZ mortgages - worth $4.5 billion - had reached the end of their initial six month deferral. Most had returned to paying with $500 million worth of balances granted an extension.
"Over the past year we've expanded our residential [mortgage] lending by 7% and have helped first home buyers into 5343 homes. We've increased our business lending by 3% and have been one of the few banks to expand our lending to farmers and agriculture," McLean says.
The bank's net loans grew 5% to $88 billion, and total deposits increased 10% to $71 billion. Westpac's KiwiSaver funds under management increased 14% to $8 billion.
Westpac NZ's net interest margin fell 19 basis points to 1.97%. Westpac NZ attributed its higher expenses to higher spending on risk and compliance programmes, including meeting the Reserve Bank's outsourcing requirements.
Westpac Banking Corporation posted a 62% drop in annual cash earnings to A$2.608 billion. Its net interest margin fell nine basis points to 2.03%, return on equity was down to just 3.83% from 10.75%, and common equity tier 1 capital ratio, as a percentage of risk weighted exposures, rose to 11.13% from 10.67%. The bank's annual dividend was 31 cents per share, equivalent to 49% of cash earnings.