Westpac has recorded a 36% rise in annual cash profit from its New Zealand operations with impairment charges dropping 39% in the year to September.
The bank said New Zealand cash earnings rose to NZ$322 million in the year to September 30, from NZ$236 million last year. Impairments fell to NZ$347 million from NZ$572 million.
Westpac said its overall lending growth rose 2% in the year, versus a 0.3% fall in systems credit. Westpac recorded mortgage growth of 6% over the year, well ahead of systems growth of 2%. Consumer lending fell 6% and business lending rose 2%. However, the bank said mortgage and business lending growth eased back to just 2% and 1%, respectively, in the second-half although this was still ahead of "a slowing system."
The bank said deposit growth of NZ$1.7 billion funded 81% of its loan growth.
Annual net interest margins fell 13 basis points, which Westpac attributed to higher retail and wholesale funding costs. However, second-half interest margins rose 9 basis points with customers' switching to floating mortgages paying higher interest as their fixed rate mortgages matured.
"The repricing of the business portfolio also continued to ensure pricing better reflected the rise in funding costs. Deposit spreads also improved marginally," Westpac said.
The bank said its second-half interest margin was 2.16%, up from 2.07% at March, but down from 2.22% in the second-half last year.
Net interest income fell 3% to NZ$1.2 billion with non-interest income down 14% to NZ$348 million. Operating expenses rose to NZ$746 million from NZ$741 million with Westpac attributing NZ$3.5 million of the NZ$5 million increase to costs associated with the September 4 Canterbury earthquake.
Like BNZ and ANZ, Westpac has benefited by releasing the unused part of a provision raised last year to cover its structured finance transaction dispute with the Inland Revenue Department (IRD).
Westpac provisioned for A$703 million last year after losing a structured finance transaction case to the IRD in the High Court.
However, along with ASB, BNZ and ANZ, Westpac then settled with IRD last December agreeing to pay 80% of the core tax in disupte, plus interest. It was therefore able to reverse the unused portion of its provision resulting in a A$106 million cash earnings credit for the September 2010 year. ANZ and BNZ benefited to the tune of NZ$38 million and NZ$167 million, respectively, in their September year results.
KPMG's June quarter Financial Institutions Performance Survey out last week, showed Westpac's interest margin down 6 basis points in the six months to June. It was the only one of the big four banks to record a fall with ANZ's interest margin up 20 basis points, BNZ's up 9 basis points and ASB's up 15 basis points.
(Update adds more detail).
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