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Westpac NZ's first-half earnings rise

NZ Newswire logoNZ Newswire 7/05/2017 Paul McBeth

Westpac Banking's New Zealand unit has eked out a 2 per cent gain in first-half earnings as a reversal in charges on bad debt offset shrinking margins that reflect competition for depositors.

Cash profit, the preferred earnings measure of the Australian-owned banks, rose to $462 million in the six months ended March 31 from $452m a year earlier, the Sydney-based lender said in a statement.

Net interest income shrank 1 per cent to $838m, even as the bank's net loans grew 7 per cent to $76.5b.

That outpaced a 32 per cent expansion in total deposits to $56.8b, while the lender's operating costs rose 2 per cent to $468m.

Westpac New Zealand's net interest margin shrank faster than local rivals ANZ Bank New Zealand and Bank of New Zealand, falling 22 basis points to 1.96 per cent, compared to a 10 point fall to 2.3 per cent at ANZ and a 15 point decline to 2.15 per cent at BNZ.

Still, Westpac's New Zealand unit registered a $36m gain from a turnaround in bad debt charges, compared to a $9m bill a year earlier, which it said was due to "the work-out and write-back of one facility combined with the improved outlook for the dairy industry".

"We saw growth in targeted market sectors, including Auckland and millennials, and it is good to see a continuing recovery for many of our dairy farming customers, which is reflected in our significantly improved impairment position," Westpac New Zealand chief executive David McLean said in a statement.

"At the same time, we experienced reduced net interest margin: a result of strong lending competition and increased funding costs."

Westpac's New Zealand division contributed A$435m ($466m) to the group's cash earnings of A$4.02b, up 3 per cent from a year earlier.

Chief executive Brian Hartzer said the institutional division was the group's stand-out performer as it benefited from stronger credit quality, more customer transactions and a strong result from its markets business.

The Australian group's board declared a fully-franked interim dividend of A94c per share to be paid on July 4 and unchanged from a year earlier.

The dual-listed shares rose 0.4 per cent to $36.55 on the NZX, having gained 7.4 per cent so far this year.

Westpac's New Zealand expense-to-income ratio increased to 43.4 per cent from 41.8 per cent a year earlier after overhauling its systems to boost the ease of digital access for its customers.

That's seen it close a net 19 branches in the six months ended March 31, with full-time equivalent staff numbers cut by 153.

The bank's customer numbers increased to 1.36 million from 1.35 million a year earlier, while the number of complaints fell to 11,400 from 13,400.

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