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Earnings down for Westpac NZ

NZ NewswireNZ Newswire 6/11/2016 Paul McBeth
Westpac said it would provide alternatives for customers, including digital devices for community use and upgraded ATM and deposit facilities. © Cameron Spencer/Getty Images Westpac said it would provide alternatives for customers, including digital devices for community use and upgraded ATM and deposit facilities.

Westpac's New Zealand division has posted a 4 per cent fall in annual earnings as lenders give up margin in the hunt for mortgage customers.

Cash earnings, the favoured measure of the Australian-owned lenders, fell to $872 million in the 12 months to the end of September from $905m a year earlier, it said.

Net interest income edged up 2 per cent to $1.71 billion, with the bank's New Zealand loan book expanding 9 per cent to $75.1b over the period, though net interest margins shrank 12 basis points to 2.13 per cent.

"Intense competition for new lending and a shift to lower-spread fixed-rate mortgages has compressed margins," Westpac said. "Weak financial conditions in the dairy sector drove stressed assets to TCE (total committed exposure) up 94 basis points to 2.54 per cent."

Last week BNZ and ANZ's NZ division also reported declines in annual earnings, with both registering a 12 basis point decline in net interest margins due to the heightened mortgage competition and higher cost of raising funds overseas. Commonwealth Bank of Australia's ASB Bank division will provide a quarterly update this week.

Westpac's New Zealand operation also faced a 5 per cent increase in operating expenses to $919m and impairment charges for bad debts jumped 26 per cent to $59 million, largely due to "higher stress in the dairy portfolio and a lower level of writebacks and recoveries", it said.

The New Zealand operation contributed $A812m, or 10 per cent, to the group cash earnings of $A7.82b, which was largely unchanged from a year earlier.

It's New Zealand mortgage book grew 7 per cent to $45.1b, while business lending climbed 12 per cent to $28.4b and deposits climbed 11 per cent to $57.5b.

In a presentation to investors, Westpac said its impaired dairy assets in New Zealand remain low, though a quarter of the portfolio was 'stressed' compared to 10 per cent at the end of March.

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