Dow Jones – Westpac Records 1st Half Cash Profit of A$3.44 Billion — Update
By Alice Uribe
SYDNEY–Westpac Banking Corp. said costs would be higher this fiscal year as part of its three-year reset plan, which aims to strengthen the lender’s governance across both financial and non-financial risk.
The Australian bank on Monday said it was targeting an 8 billion Australian dollar (US$6.2 billion) cost base by the 2024 fiscal year to improve its efficiency. While costs are expected to increase in fiscal 2021, they would start to fall from fiscal 2022, Westpac said.
“A significant reset is required to ensure the business is cost competitive over the long term, particularly as we navigate the pandemic’s recovery phase and an extended low-rate environment,” Westpac Chief Executive Peter King said.
Westpac needed to simplify and accelerate its digital transformation as it prepares to exit all specialist businesses, he said.
Westpac said it expected to invest around A$3.5 billion-A$4 billion in the business over the next three years as part of the cost-reset plan.
The cost outlook was detailed by Westpac alongside its first-half result, which included an almost tripling in net profit as one-off items including customer refunds and litigation costs, and impairments were lower than a year earlier.
The bank said its net profit totaled A$3.44 billion in the six months through March, up from A$1.19 billion at the same stage of the 2020 fiscal year.
“First half earnings were considerably higher than the prior corresponding period, mainly due to an impairment benefit reflecting improved asset quality and a better economic outlook,” said Mr. King.
Cash earnings–a measure closely tracked by analysts that strips out non-core items such as revenue hedges and treasury shares–rose by 256% to A$3.54 billion. This was ahead of consensus expectations for cash earnings of A$3.3 billion.
Excluding notable items including after tax provisions for litigation and customer refunds, cash profit rose by 60% to A$3.82 billion. Still, net interest margin was down four basis points to 2.09%.
Directors declared an interim dividend of A$0.58 per share. Westpac last year deferred its decision and then chose not to pay an interim dividend for the first half of fiscal 2020.
The group’s common equity tier 1 capital ratio was 12.34% at the end of March, up 153 basis points on year.
Mr. King said after a challenging 2020, the Australian economy was now rebounding.
“Most significantly, unemployment is falling and there are more people employed now than pre-Covid. A strong labor market will continue to support growth in the economy,” he said.
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(END) Dow Jones Newswires
May 02, 2021 18:49 ET (22:49 GMT)
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