Australia’s Second-Biggest Lender Westpac Returns Worst Profit Since 2013

Westpac Banking Corp., the second-biggest lender in Australia, has reported its lowest half-year profits in over half a decade, according to Reuters.

The company’s cash profits fell 22 percent in the period between October and March, hitting AUD$3.3 billion (approximately $2.3 billion). That was a “disappointing result,” noted the lender’s CEO Brian Hartzer.

Analysts had polled an average of AUD$3.52 billion, which means the drop is significant given how closely-watched cash profit is as a measure of performance.

The 200-year-old financial provider serves a customer base of more than 14 million. However, it’s its half-year earnings that caught the eye, with the lender flagging an AUD$617 million loss from refunds related to fees it charged improperly.

This is Westpac’s worst half-year profit returns since 2013 and reportedly comes at a time Australia’ biggest lenders are grappling with low mortgage demand amid lending caps. 

As part of the country’s “Big Four” lenders and banking providers, Westpac has seen interest income shrink alongside the housing market. Costs have also skyrocketed as the bank moved to reimburse clients after it offered bungled up services.

The bank’s net interest margin fell to 2.12 percent in the period between October 2018 and March this year, a drop of 16 basis points. Moreover, its net interest income declined by 4 percent.

Last year, Westpac raised the interest rates to a number of home loan offerings as it aimed to safeguard profit margins as costs escalated.

That failed as a downturn in the property space and stringent lending conditions meant banks had to scrap for customers. It basically meant that writing new loans isn’t such a viable initiative for now.

Westpac has also seen its properties in possession jump 21 percent to reach a total of 482, which represents about 0.31 percent of the loans.

In the market, Westpac shares traded at 1.6 percent lower compared to a decline averaging 0.9 percent across the market.

CEO Hartzer noted that strict regulatory demands continue to shape the industry. Also key was the impact of slow economic growth and reduced demand from consumers and businesses.