Westpac NZ annual profit drops 7pc, says it is well-positioned

Catherine McGrath, Westpac New Zealand chief executive.

Westpac New Zealand reported a net profit of $963 million for September year, and said it is well-positioned to support customers as the economy enters what it expects to be a “difficult” part of the cycle.

Excluding notable items, such as the sale of Westpac Life in the 2022 financial year, the bank’s net profit was down 7 per cent compared with the same period last year.

In Australia, the parent company posted a net profit of A$7.2 billion ($7.81b), up 26 per cent, an improved A72c final dividend, and a A$1.5b on-market share buyback reflecting its strong balance sheet.

Westpac NZ chief executive Catherine McGrath said the bank had invested heavily in helping New Zealand customers through difficult times and strengthening its core business.

The bank was heading into the next 12 months with positive momentum, she said.

“Throughout the year we’ve stepped up to help New Zealanders through a range of immediate challenges and set them up for the longer term,” McGrath said in a statement.

The bank’s pre-provision profit was $1479m, down 5 per cent.

Net operating income was $2774m, up 2 per cent.

Operating expenses were $1295m, up 12 per cent.

There was a net impairment charge of $135m, compared with an impairment benefit of $27m in the previous period.

Net interest margin - the profit the bank makes between the money it takes in and what it lends out - was 2.11 per cent, up 11 basis points.

Home lending was up 3 per cent at $65.8b while business lending was up 2 per cent to $32.8b.

McGrath said a significant amount of work has been done to set Westpac up to better support customers in a changing banking landscape.

The bank paid $381m in tax, making it one of the largest taxpayers in the country.

Westpac has 21,000 New Zealand-based shareholders.

McGrath said severe weather and climate-related impacts continue to be a key concern for customers and stakeholders and Westpac was committed to helping Kiwis take action on these issues.

She said the bank had contacted more than 88,000 customers who were due to roll on to significantly higher fixed home loan rates to help them understand their options.

“We’ve also followed up with phone calls to more than 9000 customers who we’ve identified as most at risk of financial stress, and we’ve expanded our extra care team to provide more proactive support,” McGrath said.

Hardship levels remained low and the number of homeowners behind on repayments has reduced over the past six months, she said.

McGrath says New Zealand is heading into a difficult phase of the economic cycle, but remains well-positioned compared to other economies.

“Last week our economists released their Quarterly Economic Overview showing subdued growth likely throughout 2024, with uncertainty over higher long-term interest rates and weakness in our key trading partners, most notably China,” McGrath said.

However, there were causes for optimism.

“Unemployment remains low, wage growth fairly high and tourism numbers continue to recover. In addition, strong net migration is adding to our labour force and boosting demand, including in the housing market,” she said.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.