Strong economy earns $231m for Westpac

By KEVIN TAYLOR

A strong New Zealand economy has helped WestpacTrust to a net profit of $231 million for the half-year to March.

The result, up 7 per cent on the six months to the end of March last year, came at the same time as parent company Westpac announced a 10 per cent rise in first-half net profit to A$1.018 billion ($1.223 billion).

WestpacTrust chief executive Tom Gallagher said the half-year had seen activity at its highest levels yet in nearly all sectors - from agriculture to the booming housing market.

The net profit was a record - excluding one-offs - and compares to $216 million made in the half-year to March 31 last year.

There was a lot of liquidity around, he said, so the bank's deposit business had been going well.

WestpacTrust had focused on the mortgage market, particularly in Auckland, where the bank had caught up with competitors in offering mobile mortgage managers.

Gallagher said the bank was shifting more customer-focused parts of its business to Auckland, the biggest market.

For example, it has opened a customer centre for small and medium enterprises in Auckland.

But Gallagher said because it was the New Zealand Government's banker, its registered head office and back-room functions would remain in Wellington.

Although he moved to Auckland six months ago, he splits his time between the two cities.

Westpac also confirmed yesterday that an agreement had been reached to sell its AGC consumer finance arm to GE Capital for A$1.65 billion ($2 billion) subject to Australian regulatory approval.

The Commerce Commission has given its blessing to the New Zealand side of the deal.

Westpac chief executive David Morgan said he was delighted with the AGC sale agreement.

"It really allows us to redeploy resources from a high-risk, lower-growth area to a lower-risk, high-growth part of our business. It enhances our future platform."

Westpac expects to make a profit of at least A$750 million ($902 million) on the AGC sale.

It comes about a week after Westpac bought wealth management business Rothschild Australia Asset Management for A$323 million ($388 million).

Morgan said the first-half profit was achieved despite Westpac's bad debts from corporate collapses, including Enron and Pasminco, rising to A$271 million ($325 million) from A$176 million ($211 million).

But the impact of the bad debts was offset by strong revenue growth and benefits from cost cuts.

Westpac is the second major Australasian bank to report its half-year result, and both have broken the billion-dollar profit mark.

ANZ last week reported a 17.3 per cent net profit boost to A$1.05 billion ($1.26 billion), with the New Zealand operation making a $171 million net profit. The two big results follow the release of a report last month showing Australian banks, which dominate the New Zealand banking scene, are paying their shareholders some of the highest results in the financial services world.

* Additional reporting by agencies