Westpac posts $482m profit, welcomes regulator's call for proof of good conduct

Westpac New Zealand chief executive David McLean says he is confident in the bank's processes and systems as it responds to a call by regulators to prove itself clean. Photo/Brett Phibbs.

Westpac's New Zealand boss says it is confident in its systems and processes and will cooperate fully with regulators who have demanded answers from New Zealand banks in the wake of controversial revelations from Australia's banking inquiry.

Last Monday New Zealand's banking regulators the Financial Markets Authority and the Reserve Bank told New Zealand's banks they need to prove they are clean and have until May 18 to provide written evidence.

In a statement released as the bank announced a half year cash profit of $482m chief executive David McLean said it was "absolutely committed to operating in a way that builds confidence and trust with our customers."

McLean said it welcomed the review and would "cooperate fully in order to show the differences between the New Zealand and Australian banking environments."

"We are confident in our systems and processes and are committed to continuous improvement to ensure we operate at best practice."

Westpac New Zealand's result was up 4 per cent in the six months to March 31 compared to the same prior period.

The Australian-owned bank reported a 14 per cent lift in core earnings to $698m for the six months to March 31 while its net operating income rose 6 per cent to $1.16 billion.

McLean said the result reflected a strong underlying economy and targeted growth in key sectors.

"This is a good result across a range of business areas, despite a slowing housing market, a competitive deposit environment, and impairments moving back to more normal levels.

"These results have been supported by strong fundamentals in the economy," McLean said.

The bank's net interest margin rose 19 basis points to 2.15 per cent as the bank grew its deposits faster than its loan book.

The bank's deposits rose 8 per cent to $61.6 billion while its net loans grew 3 per cent to $79.1b.

Westpac's home lending grew 4 per cent to $48b while its business lending rose 3 per cent to $30b.

Its operating expenses fell 4 per cent to $458m on the back of cost management and productivity gains.

Those gains included the closure of five branches in the six months to March 31 as it increased its self-service facilities.

Westpac New Zealand recorded a $27 million impairment charge - a reversal of its $40m gain in its first half last year.

The bank saw an increase in consumer delinquencies while its credit quality improved as the dairy sector continued to pick up.

"In the dairy sector, it's been encouraging to see the milk price and dividend pay-out stabilise and farmers continue to reduce debt, restoring their finances after the pay-out slump," McLean said.

Funds under management in the Westpac KiwiSaver Scheme increased by 19 per cent from $4.67b to $5.56b, for the full year ended 31 March 2018.

During the same period, the number of Westpac KiwiSaver Scheme accounts increased by 1.7 per cent, and the average balance increased from $12k to $14k.

"More than 2,000 customers have actively changed their Westpac KiwiSaver Scheme fund to one that better suited their needs."

McLean said the cooling housing market had also presented an opportunity for first-home buyers with an 11.7 per cent increase in Westpac KiwiSaver Scheme members withdrawing funds for a first home over the six months to 31 March.

Westpac Australia's net profit rose 7 per cen to A$4.19b.