Westpac New Zealand chief executive Catherine McGrath. Photo / Mark Tantrum
Westpac New Zealand has boosted its branch hours by around 300 a week as it responds to more people being out and about under eased Covid restrictions.
But the bank has also closed down 18 ATMs since October as fewer people use cash to pay for goods and services.
Westpac New Zealand made a cash profit of $635 million in the six months to March 31 - up 9 per cent on its 2021 first half largely driven from the gain on the sale of its life insurance business.
Excluding notable items its cash earnings were down 15 per cent to $504m while the net profit of the WNZL Banking Group was down 5 per cent to $497m.
Westpac New Zealand chief executive Catherine McGrath, described it as a solid result in a fast-changing market.
She said the predominant reason for the 15 per cent year on year decline in its underlying cash profit was higher spending on risk and compliance projects and a lower impairment benefit.
"I think given the focus the bank has on strengthening our foundations it is unsurprising to see we are spending more money in some places in the bank."
Last year the bank came under fire from the Reserve Bank of New Zealand for compliance issues and with risk governance processes and practices applied by Westpac's board and executive management.
An independent report released in November undertaken by consultants Oliver Wyman found "material shortcomings" in Westpac NZ board's oversight.
Westpac had already moved to address its recommendations including a shake-up of its board by the time the report came out.
A second report about liquidity issues is also due to go to the Reserve Bank this month.
McGrath, who only became chief executive in October, said she expected spending on risk and compliance to continue in the second half of its financial year.
The bank's loan book increased 4 per cent to $94 billion driven by higher mortgage lending which rose 7 per cent to $62.2b. Business lending was down 1 per cent to $31b.
McGrath said it hadn't seen a material deterioration in the performance so far of its loan book.
"But we are live, as is everybody else, to the combination of interest rates going up, inflation going up, supply chains being pretty challenging.
"We think we will continue to see a bit of growth but it will be more suppressed than we will have historically seen in the market and then we think house prices will fall and will fall a bit faster than we had originally predicted and that's basically reflecting the pace at which interest rates are starting to move up. "
But she said that anybody who had bought their house for the long-term would be fine.
"It's a correction that just takes us back to 2021."
Asked how well recent borrowers would cope with rising interest rates McGrath said it had been looking closely at that.
"We are quite conservative in how we look at whether or not people can afford to pay and we make an assumption of higher interest rates when we take into account their expenditure.
"We think there is a reasonable amount of resilience built into it. What we can see at the moment is customers are doing really well on their loan repayments and 68 per cent of our home loan customers were ahead on their mortgage payments at the end of 2021. So that is a slight increase from what we have seen before."
She said most people had seen higher interest rates coming and had either consciously or sub-consciously made "pretty sensible" decisions about getting a little bit ahead on mortgage repayments.
On business lending being down, McGrath put that down to repayments for a couple of structured finance exposures.
"But we are seeing continued interest from customers to diversify and term out their facilities. Unsurprisingly we have seen some sectors deleveraging and rebuilding equity. I think it is quite understandable but from the conversations, we are starting to have I think there is going to be more underlying growth than we have seen."
Personal loan growth was also down and she put that down to an awareness of tighter credit conditions rather than any change of track by the bank.
"Our risk appetite hasn't changed."
But the bank has begun opening its branches more and McGrath said bankers were keen to get out and have more face to face conversations.
Of its 114 branches, 74 were increasing their hours.
"As we have moved to orange more people are out and about so you can see more foot traffic on our main streets. But the second piece is we want to make sure we are there for customers and standardising the hours makes it easier."
She said there was an ongoing debate in retail banks about whether to make customers make appointments so the branch was more efficient or to have doors open so that when people thought about it they could come in.
"I'm more err on the side of - not that many of us are proactively engaged in our finances that we think ahead when we need to do things. Therefore having the doors open so that we can handle inquiries is really important."
McGrath said it had also seen a strong return to its head office increasing from around 33 per cent in April to over 60 per cent last week. ANZ and BNZ both reported last week that around a third of workers were back in their head offices.
But its financial report also shows a few Covid casualties with two branch mergers and 18 fewer ATMs.
McGrath said it continued to see a reduction in cash usage for customers.
"In New Zealand in particular Covid has accelerated that decline. But we still continue to think having lots of contact points for customers is incredibly important."
It still has 446 ATMs in operation.
McGrath said its biggest priority ahead was making sure it was available to have conversations with its customers when things were looking uncertain.
"We are hopeful that opening the borders we will start to see a bounce in the economy but we are all feeling the pinch a bit in terms of inflation and interest rates.
"And so one of the reasons the branches are reopening and we are getting another 300 hours open per week is to create that capacity for those walk-in conversations that customers want to have before things are getting a little bit trickier. So supporting customers in trickier times is priority number one."
Thirteen companies each pay more than $100m in annual income taxes.