Westpac first quarter net profit hits $1.9 billion
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The news: Westpac has recorded a first quarter net profit of $1.9 billion, up 5% on its second half quarterly average, but forfeited core net interest margins even as it grew proprietary lending.
The numbers: Revenue increased 1% as net interest income grew by 2%, driven by a growing balance sheet and a stronger Treasury performance, and offsetting a 4% decline in non-interest income.
Excluding notable items, Westpac's return on equity hit 10.3%, up 60 basis points on the second half average. Pre-provision profit increased 7%.
Westpac grew deposits by $12 billion over the quarter, including 3% household deposit growth and 4% growth in business transaction accounts.
Lending jumped by $22 billion, on the back of 7% institutional growth and 3% growth across mortgages and business lending. Those figures exclude the RAMS business which Westpac sold last year with the bank noting it had grown its proportion of proprietary home lending for a second consecutive quarter.
The bank's net interest margin (NIM) shrunk 1 basis point to 1.94%, with core NIM down 3 basis points, attributed to increased banking competition and lower interest rates.
Westpac said its operating expenses broadly remained stable, with a second half restructuring charge seeing them come in 5% lower at $3 billion. The bank is targeting $500 million in productivity savings this financial year.
The context: Like the Commonwealth Bank on Wednesday, Westpac noted fewer customers appeared financially stretched. Impairment charges dropped to 6 basis points and customer stress exposures dropped 11 basis points to 11.7% of tangible common equity (TCE).
However Westpac's common equity tier one ratio also lowered to 12.3% in December after the bank's dividend more than offset earnings. It recorded $5 billion in credit impairment provisions, which included a $2.1 billion buffer on expected base case losses.
What they said: Westpac chief executive Anthony Miller signalled the bank was well positioned to continue growing amid a strong economic backdrop.
"We are optimistic on the outlook for the economy and expect demand for both business and household credit to remain resilient. Our strong financial foundations provide us with the stability and capacity to support our people, customers, shareholders and the broader economy," Miller said.
The source: ASX
