Westpac half-year profit jumps 68% despite Christchurch earthquake hit

Westpac half-year profit jumps 68% despite Christchurch earthquake hit

Westpac New Zealand says first-half year cash earnings surged 68% from the same period of last year despite a NZ$40 million hit from the February 22 Christchurch earthquake.

The bank said cash earnings for the six months to March 31 rose to NZ$210 million from NZ$125 million in the same period of the previous year due to a NZ$71 million reduction in impairment charges and NZ$50 million lift in core earnings. See the Westpac Group's full announcement here and the investor presentation here.

Westpac said the higher profit came despite costs associated with the earthquake impacting cash earnings by about NZ$40 million during the first-half. These costs included direct financial support to the Christchurch relief effort, and higher impairment charges of NZ$56 million.

Both net interest income and net operating income rose 9%, the latter to NZ$819 million. Margins rose 22 basis points from the first-half of last year (and 13 basis points from September 30) to 2.29% with Westpac saying much of the growth came from the maturity of lower spread fixed rate mortgages and customer preference for floating rate mortgages. See more on the rise and rise of floating mortgages here. Business lending had also continued to be "repriced."

"These moves more than offset the continuing rise in wholesale funding costs," the bank said.

Operating expenses rose 4% to NZ$386 million which Westpac said reflected investment in "front line resources." Impairment charges fell 34% to NZ$137 million despite the February earthquake.

Mortgage lending rose NZ$300 million from September 30 last year to March 31 this year to NZ$34.2 billion, with business lending down by NZ$300 million to NZ$14.3 billion leaving net lending flat at NZ$49.8 billion. Total deposits rose NZ$1.1 billion to NZ$31.6 billion. Total assets rose slightly, to NZ$51.3 billion from NZ$51.2 billion.

Westpac's impaired assets to total committed exposure rose to 1.50% from 1.26% at September 30. The bank's expense-to-income ratio was unchanged from September 30 at 47.1%.

Meanwhile, the Westpac group's cash earnings rose 7% to A$3.2 billion, and statutory net profit jumped 38% to A$3.9 billion. The group will pay an interim fully franked dividend of A76 cents per share, up 17%.

(Update adds further detail).

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