By Gareth Vaughan
The Westpac New Zealand Group recorded an NZ$82 million drop in total gross loans in the March quarter as the major banks continue to struggle to find lending growth.
Westpac's latest General Disclosure Statement (GDS), the first one released under the Reserve Bank's new rules, shows total gross loans of NZ$50.739 billion at March 31, down from NZ$50.821 billion at December 31. The overall drop comes despite a NZ$170 million rise in housing term loans to NZ$34.472 billion, with non-housing term lending heading the other way, dropping by NZ$218 million to NZ$13.236 billion.
Provisions for impairment charges on loans rose by NZ$16 million to NZ$765 million, leaving total net loans down NZ$98 million at NZ$49.974 billion.
The Westpac drop comes as the latest Reserve Bank sector credit figures, for March, show the only month-month growth came in housing with housing debt up to NZ$171.58 billion from NZ$171.49 billion in February. Consumer debt fell to NZ$11.83 billion from NZ$11.96 billion, business debt dropped to NZ$73.09 billion from NZ$73.25 billion and agricultural debt slipped to NZ$47.48 billion from NZ$47.75 billion.
Westpac has been showing growing signs of frustration at customers' reluctance to take on new borrowing. Releasing Westpac's half-year financial results earlier this month, CEO George Frazis said that after 18 months of deleveraging by both households and businesses, New Zealand now needed to move from "caution to confidence." And Westpac was "match fit and ready to help."
And in February Westpac launched "Grow New Zealand" a programme that involves Frazis hosting forums across the country for businesses with the bank saying it wants to help restore confidence in the economy and "pull the economy forward."
In the December quarter Westpac, which had grown lending faster than its big three rivals in the year to September last year, recorded a small rise of NZ$58 million in total gross loans.
Profit up 30%; No dividend
Despite its lending contracting, Westpac grew profit after tax by NZ$22 million, or 30%, in the three months to March to NZ$96 million. Net interest income rose NZ$42 million, or 15%, to NZ$326 million, and impairment charges on loans fell NZ$14 million, or 17%, to NZ$68 million.
All big four banks - ANZ, ASB, BNZ and Westpac - recorded profit growth in the first-half of their financial years as provisions for credit impairments fell and home loan customers switched from fixed-term mortgages to the more lucrative floating ones.
The GDS shows Westpac NZ again paid no dividend to its Australian parent as it preserves capital ahead of the transfer of banking operations to Westpac NZ from the group's New Zealand Branch, due for completion by the end of 2011. This transfer of loans and deposits to its locally incorporated subsidiary from its Australian parent is being done under a deal reached with the Reserve Bank after an independent review of Westpac's operating model in 2009.
In 2004 Westpac, which had been operating in New Zealand solely as a branch of its Australian parent, agreed to incorporate in New Zealand. Westpac NZ was registered as a bank in November 2006 meeting the Reserve Bank's local incorporation policy that all systematically important banks operating in New Zealand be locally incorporated.
Dual registration model
Since 2006 Westpac has run the dual registration operating model with Westpac NZ conducting its retail and business banking activities in New Zealand and the branch undertaking its institutional and financial market activities. Under the transfer about NZ$6.5 billion worth of institutional customers' loans and NZ$5.3 billion of institutional customer deposits are being shifted. Westpac says term intra-group funding of about NZ$3 billion will be put in place.
The bank estimates that, for the six months to March, the business activities being transferred had revenue of about NZ$80 million and net profit after tax of about NZ$50 million.
Westpac NZ last paid a dividend to its parent, NZ$220 million, in 2009.
The GDS shows the group's total deposits down NZ$85 million in the three months to March at NZ$33.169 billion. Debt issues rose by NZ$1.605 billion to NZ$17.066 billion with the bulk of the increase - NZ$1.312 billion - coming from short-term commercial paper issues with total short term debt rising to NZ$8.265 billion.
Total past due assets dropped to NZ$1.942 billion from NZ$2.213 billion. Meanwhile, Westpac's total assets rose by NZ$1.4 billion to NZ$57.695 billion with much of the increase coming in trading securities and available for sale securities as the bank purchased Treasury bills and government bonds.
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