A pedestrian looks at his phone as he walks past a logo for Australia’s Westpac Banking Corp located outside a branch in central Sydney, Australia, November 5, 2018. REUTERS/David Gray Acquire Licensing Rights
Aug 21 (Reuters) – Westpac Banking Corp (WBC.AX), Australia’s third-largest lender, on Monday posted a quarterly cash profit of A$1.8 billion ($1.15 billion), as increased competition for home lending squeezed margins.
Australia’s major banks have all flagged stiff competition in the mortgage space, along with higher expenses as inflationary pressures weigh.
Sydney-based Westpac said expenses for the second half to date were up 5% from the first half, fuelled by higher supplier costs and staff wages.
Interest rates in Australia have been raised by 400 basis points since May last year in the most aggressive tightening campaign in modern history, which the banks have passed on to customers.
The higher interest rates have also contributed to increased living costs, which are pushing up debt arrears.
In Australia, loan repayments past 90 days late rose to 0.80% in the three-months ended June, up 7 basis points from 0.73% in March, Westpac said.
The lender reported a core net interest margin of 1.86% for the quarter, down 4 basis points from the first half of fiscal 2023.
“The Group remains committed to cost discipline with recent cost reset actions driving a full time equivalent employee reduction of approximately 2% for the second half 2023 to date,” Westpac said in a statement.
It also reported a modest increase of its stressed assets to 1.16% of committed exposures from 1.10% in March, indicating a slight worsening in asset quality.
The bank’s CET1 capital ratio – a measure of spare cash – was 11.9% for the June quarter, down 42 basis points sequentially, and as compared to the group’s target operating range of 11.0% to 11.5%.
Earlier this month, Commonwealth Bank of Australia (CBA.AX), the country’s biggest lender, posted a record annual profit but warned of higher living costs impacting margins, while no. 2 lender National Australia Bank (NAB.AX) saw its margins decline in line with the trend.
Westpac did not disclose a profit figure for the third quarter last year. It posted cash earnings of A$2.18 billion for the six months ended September 2022.
($1 = 1.5603 Australian dollars)
Reporting by Riya Sharma and Archishma Iyer; Editing by Lisa Shumaker and Sam Holmes
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