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Westpac NZ grows lending faster than industry wide rate in June quarter with mortgage delinquencies down

Westpac NZ grows lending faster than industry wide rate in June quarter with mortgage delinquencies down

The Westpac Banking Corporation says its New Zealand subsidiary grew lending by 2% in Kiwi dollar terms in the June quarter, which is above anemic industry wide growth, with increases in both business and mortgage loans.

Westpac made the comment in its third quarter trading update which showed the group's unaudited cash earnings down 2% to A$1.55 billion (compared with results for the average of the first and second quarters) with higher group impairment charges at about A$300 million, although it said New Zealand impairments fell. The group's first-half year impairments totalled A$463 million.

Westpac group unaudited cash earnings in the third quarter of last year were 11% lower at A$1.4 billion with impairment charges also about A$300 million.

The 2% lending growth recorded by Westpac NZ outstrips the systems credit growth achieved by all the banks in the June quarter, based on Reserve Bank figures. The central bank's sector credit data shows agriculture credit rose just NZ$50 million during the three months to June 30 to NZ$47.251 billion, business debt rose just NZ$16 million to NZ$72.348 billion and total household claims, which includes home loans and consumer debt, rose NZ$712 million to NZ$184.103 billion.

The Westpac group as a whole managed just 1% lending growth.

"Westpac NZ continued to grow its share reflecting its significant investment in staff training and its increased footprint via its new community branches. Margins were also higher," the Westpac group release said. The continued rise in margins comes after Westpac NZ's first-half year margins rose 13 basis points to 2.29% as profit jumped 68% to NZ$210 million.

Westpac also said New Zealand mortgage delinquencies fell over the June quarter by 8 basis points to 72 basis points. Westpac NZ's capital adequacy ratios fell, with its tier one ratio down to 9.9% at June 30 from 10.2% at March 31 (the minimun is 4%) and total capital ratio down to 12.8% from 13% ((the minimun is 8%).

Earlier this month Westpac NZ CEO George Frazis said the general themes in Westpac NZ's business were evidence of a slowly improving economic environment with growing confidence around the recovery across the board. Furthermore systems (credit) growth was improving with Westpac's share on the rise across all its major products, plus ongoing margin improvement being driven by both business and consumer customers, well managed expenses and impairment charges continuing to moderate. Frazis added that Westpac aims to expand its wealth, insurance and financial planning businesses in New Zealand.

Meanwhile, Frazis also said said it had become clear that the financial impact of the Christchurch earthquakes on Westpac was likely to be less severe than initially expected and that the housing market was improving. 

"With much of New Zealanders wealth actually tied up in housing, this greater stability is adding to confidence," Frazis said.

In the earthquake red zones, where the government has offered to buy badly damaged houses at 2007 prices, Frazis said Westpac held mortgages on about 950 of the 5,000 houses.

"Out of those 950 houses, there's only six houses that have a valuation shortfall to the tune of less than NZ$100,000 all up."

In the orange zones, where it's not yet clear whether residents will be able to remain in their homes, the cost stemming from the houses with Westpac mortgages is about NZ$300,000, Frazis added.

"Although it's still early days, if we look at the economic overlay (A$32 million in the group's collective provision charge) that we took at the half-year as a result of the impact of households from the earthquake, it's likely to be seen as quite conservative."

(Update adds more detail).

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