Westpac NZ’s first half profit falls 33pc, partly driven by floods

Weather-related events this year have affeccted Westpac NZ's half year net profit. Photo / 123rf

Westpac New Zealand reported a 33 per cent fall in net profit to $426 million for the six months to March - partly driven by the financial impact of severe flooding in the North Island - but said its underlying performance had been stable.

At a group level, Westpac’s half year profit came to A$4 billion ($4.28b), up 22 per cent on the first half of the previous financial year.

Westpac NZ said last year’s one-off sale of Westpac Life not being repeated and a lift in impairment provisions, including an overlay for financial impacts of severe weather in the North Island, had contributed to the fall in net profit.

There was a net impairment charge of $154m, compared with an impairment benefit of $10m in the previous comparative period.

Net interest margin - a broad measure of a bank’s performance - came to 2.10 per cent, up 14 basis points.

Excluding the sale of Westpac Life and other notable items, its net profit was down 15 per cent compared with the same period last year.

Chief executive Catherine McGrath said Westpac NZ had made progress in supporting customers’ home ownership, business growth and savings aspirations during the reporting period.

She said the bank had offered significant support to customers affected by Cyclone Gabrielle and flooding.

“We’ve seen some really positive momentum during the reporting period.

“More New Zealanders have chosen to become Westpac customers, and we have grown mortgage lending by 5 per cent, business lending by 4 per cent and deposits by 2 per cent.

“We’re in a stable and well-capitalised position and are well-placed to support our customers.”

While Westpac NZ had delivered a stable performance during the half-year period, the weakening economic cycle and impact of severe weather had been felt in the financial result, she said.

McGrath said there was not yet clarity about several key issues for homeowners and businesses severely impacted by Cyclone Gabrielle and flooding in the North Island.

“As soon as the outlook is clearer, we will be able to work with our customers to agree the best way we can support them over the longer term. Due to the current uncertainty, we have made a weather event impairment overlay.”

She said another factor within the $154m impairment charge was the deteriorating economic outlook impacting households and businesses.

Westpac economists, and several others, are forecasting a recession this year.

“The global outlook remains uncertain and funding markets are moving around,” she said.

“In addition, inflation and consumer spending remain high, increasing the risks of a hard landing.

“The rising cost of living has squeezed households and interest rates have risen quickly. While we are not currently seeing significant numbers of customers requiring hardship assistance, demand is slowly increasing, and we expect it to rise further as the outlook worsens.”

The group declared a dividend up A70c, fully franked, up 15 per cent.

The Westpac group’s return on equity jumped 205 basis points to 11.3 per cent.

Group chief executive Peter King said the first half result reflects the progress made “in becoming a simpler, stronger bank.

“Disciplined cost and margin management has lifted our return on equity and allowed us to increase dividends to 70 cents per share,” he said.

“We’ve grown in a disciplined way in mortgages, performed well in business and institutional banking and stayed the course on risk management and simplification.

“Our balance sheet strength sees us well positioned to support customers to grow and navigate any future economic challenges,” he said.

“Many customers are adjusting to repayment increases and we’re ready to help those who need time to transition.”