Westpac hits record with $614m profit

By KEVIN TAYLOR

The run of record profits by big New Zealand banks continued yesterday with Westpac revealing a net profit of $614 million for the year to September 30.

That is a 32 per cent increase on the previous year's profit of $465 million, but the result was boosted by the sale of the AGC loan book, which contributed $105 million of the profit.

Excluding the AGC contribution, Westpac's net profit increased 9 per cent. The overall Westpac group delivered a 15 per cent rise in net profit to A$2.192 billion ($2.53 billion) for the year to September 30.

Westpac's retail business in New Zealand showed strong growth as profit surged 29 per cent from A$280 million to A$362 million. Revenue in the segment increased from A$2 billion to A$2.6 billion.

Net interest income in New Zealand rose in 2002 by 11 per cent, reflecting strong volume growth in both consumer and business lending and deposits, which exceeded the effect of margin compression.

Excluding the gain from the sale of AGC, non-interest income rose by 5 per cent from 2001, mainly due to growth in transaction volumes.

Underlying operating expenses were up by 3 per cent. However, after allowing for a one-off charge following a change in accounting policy and the adoption of an international accounting standard covering employee benefits, expenses rose 7 per cent from $639 million to $685 million.

A writedown of technology assets also added to operating expenses.

Acting Westpac New Zealand chief executive Mike Pratt said he was especially pleased with the home loan and business banking performance in 2002.

For the first time, Westpac had written more than $1 billion in home loans in a year.

"In August we wrote 26 per cent of mortgage flow, so we wrote one in four home loans in New Zealand.

"Last month we wrote 23 per cent, so I'm really encouraged by what I'm seeing in the momentum of our business going forward."

Pratt said business lending rose 15 per cent this year, in an environment where underlying credit growth was 7-8 per cent.

"So clearly we have taken market share from our competition, and they are good credits because the overall condition of our book has improved."

Pratt said Westpac was continuing to focus on meeting customer needs.

The bank had already announced a $100 million investment to boost customer service in all areas, but particularly aimed at increasing Auckland market share.

Westpac would plough $60 million into a new computer system called "ASSIST".

Pratt said the internet-based technology would allow staff to view all customer information at the same time, making it easier and more efficient for staff to meet customer needs.

The other $40 million was for initiatives to strengthen Westpac in Auckland. One hundred frontline staff would be added in Auckland, and the bank's "brand presence" would be boosted. Branches throughout the country would be refurbished.

In mid-October the bank changed its name from WestpacTrust to Westpac, moved its head office from Wellington to Auckland and announced a new boss, Australian banking executive Ann Sherry.