Westpac's NZ profits up a notch

File photo / NZ Herald

Westpac Bank's New Zealand unit lifted first-half profit 2 per cent as gains in residential and business lending were offset by increased impairment charges.

Cash earnings in the New Zealand business rose to $441 million in the six months ended March 31, from $432 million a year earlier, the Sydney-based bank said in a statement. Net interest income rose 6 per cent to $832 million as the local lender grew its mortgage loan book 5 per cent to $40.7 billion and business lending expanded 5 per cent to $24 billion. Impairment charges on bad debts rose to $31 million from $4 million a year earlier, when the bank benefitted from provision recoveries.

"We achieved good growth in New Zealand, supported by changes to our distribution network and the increased use of digital channels," group chief executive Brian Hartzer said.

The Australian parent reported a small dip in first-half profit to A$3.61 billion, from A$3.62 billion a year earlier, with cash earnings flat at A$3.77 billion. While Westpac's Australian retail and banking business lifted cash earnings 8 per cent and its St George Banking Group reported a 9 per cent rise in earnings, Westpac Institutional Bank posted a 17 per cent decline in cash earnings.

Hartzer said the institutional bank's performance was hurt by an A$85 million tax charge.

The New Zealand unit widened its net interest margin to 2.29 per cent in the period from 2.28 per cent a year earlier, as cheaper wholesale funding costs and improved deposit spreads offset competitive pressure in the mortgage market.

About half of the New Zealand unit's growth in business lending was in agriculture, which has been a major focus for the bank in recent years. The food processing sector had also helped boost commercial lending for the bank in the half, it said.

Westpac's New Zealand term deposits grew 2 per cent to $25.1 billion from a year earlier, while other deposits grew 10 per cent to $26.4 billion.

Non-interest income rose 3 per cent to $245 million as funds under management swelled 22 per cent to $6 billion.

The parent's board declared an interim dividend of 93 Australian cents per share, unchanged from a year earlier, with a May 15 record date.

The dual-listed shares were unchanged at $38.32 on the NZX and have gained 11 per cent this year.

Read Westpac's latest half-year financial statements here: