Westpac New Zealand's interim profit rose $3 million as its net interest margin rose.
Figures from Westpac NZ's general disclosure statement show net profit after tax for the six months to March 31 rose $3 million to $565 million from $562 million in the same period of its previous financial year.
The bank said its net interest margin, the difference between what it borrows money at through the likes of deposits and what it lends it out at, rose 15 basis points to 2.26%, excluding notable items* which totaled $1 million in the March half this year versus $5 million in the March half last year. A shift to higher margin floating rate lending, and improved lending spreads were factors cited in the net interest margin rise.
Westpac NZ's net operating income rose $49 million, or 3%, to $1.548 billion, with net interest income up $43 million, or 3%, to $1.427 billion, and non-interest income up $6 million to $121 million.
Operating expenses climbed $36 million, or 5%, to $730 million. The increase was attributed to higher staff and third party technology vendor costs as the bank strives to improve digital capabilities, plus higher software amortisation. The bank's cost-to-income ratio fell slightly to 49% from 50.04%.
Westpac NZ's gross lending rose $1.066 billion, or 1%, in the six months from September 30 last year to March 31 this year, reaching $103.714 billion. Housing lending increased $1.497 billion, or 2%, to $69.525 billion, with corporate lending down $355 million, or 1%, to $31.409 billion.
The drop in business lending reflected challenging macroeconomic conditions and subdued business confidence, Westpac says, with agriculture lending down 3% as farmers deleverage following record milk prices.
Loan impairment charges rose $10 million, or 44%, to $33 million.
Loans at least 90 days past due rose
The bank's loans at least 90 days past due rose $69 million, or 19%, to $435 million in the six months between September and March. The biggest increase came in corporate lending, where loans at least 90 days past due rose to $104 million from $63 million. Housing lending at least 90 days past due rose to $309 million from $283 million.
Total loan provisions rose to $580 million at March 31 from $555 million at September 30.
Meanwhile, deposits and other borrowings rose $1.487 billion, or 2%, to $83.026 billion with growth predominantly attributed to savings accounts as term deposits decreased.
"We’re the smallest of the four largest banks. We’re not satisfied with that position and we are competing hard to grow," Westpac NZ CEO Catherine McGrath says.
"That means offering points of difference, through competitive pricing and innovative products and services, while also helping drive action on issues that matter to New Zealanders like fighting fraud and scams, getting more families into their own homes and boosting financial inclusion."
"While the global economic outlook is mixed, this financial result positions us well to support the economy’s growth over the second half of the year," says McGrath.
Aussie parent Westpac Banking Corporation's interim net profit after tax fell 1% to A$3.457 billion. It's return on equity rose six basis points to 9.81%, and its net interest margin fell two basis points to 1.92%. Its fully franked dividend per share rose A1 cent to A76c.
*Westpac says notable items are things not considered reflective of its ordinary operations and include unrealised fair value gains and losses on economic hedges that do not qualify for hedge accounting, net ineffectiveness on qualifying hedges and other large items.
See Westpac NZ's press release here.
Westpac group's press release is here.
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