Money Editor for NZ Herald

$3.5b profits for big four banks

Westpac's earnings are up 22 per cent in a bumper year for the Australian-owned banks

Westpac chief executive Peter Clare says it's been a very pleasing year. Photo / Dean Purcell
Westpac chief executive Peter Clare says it's been a very pleasing year. Photo / Dean Purcell

Profits for New Zealand's four largest banks have soared to close to $3.5 billion for 2011/12 after Westpac yesterday revealed another record result.

Cash earnings for the bank were up 22 per cent to $707 million after its core earnings were boosted by improved margins, good asset growth and an 11 per cent increase in deposits.

The result was also bolstered by a reduction in the amount of money the bank had to put aside for loan impairments falling from $241 million to $191 million.

Lachlan Colquhoun, banking analyst with East and Partners in Sydney, said he had been impressed by results from the ANZ and BNZ but the Westpac result was an "even more impressive result".

Colquhoun said cost cuts had played a big part across the board in strong results for all the banks.

In August ASB reported a record net profit for the year to June 30 of $685 million while last month ANZ also reported a record underlying profit increase to $1.37 billion for the year to September 30.

BNZ was the only one of the four not to break a record falling short by $44 million. The $3.5 billion total profits is up from $3.3 billion in the 2010/11 year.

Westpac chief executive Peter Clare said 2012 had been a "very pleasing year" for the bank with strong earnings momentum against a backdrop of management changes and slow credit growth.

The bank's home lending grew 3 per cent while its business lending was up 4 per cent.

Chief financial officer Leigh Bartlett said the increase in deposits had strengthened the bank's deposit to loan ratio from 66 per cent to 71 per cent allowing it to drop its level of wholesale funding from 34 per cent to 23 per cent.

The bank's reliance on short-term funding has fallen from 43 per cent to 37 per cent and domestic funding had increased from 16 per cent to 27 per cent.

Its mortgage delinquency rate had also fallen 0.2 percentage points to 0.4 per cent of loans.

Bartlett said the bank's strong all around performance meant it was well-positioned to support growth in New Zealand in the future.

Chief executive Clare said the outlook for the New Zealand economy was one of a "relatively calm place" compared to some other regions around the world.

The bank's economists are predicting 2.5 per cent GDP growth this year increasing to 3.2 per cent next year. But Clare said deleveraging was still "de rigueur" and "that appears likely to continue".

Clare said strong results from the banks was a "good thing".

"A strong banking sector is important to give the New Zealand business community confidence to invest."

Westpac's parent company lifted cash earnings 5 per cent to A$6.6 billion ($8.3 billion) with a 6 per cent gain in revenue to A$17.98 billion.

- NZ Herald

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