Healthy gain at competitors' expense gives Westpac 10pc earnings jump

Westpac New Zealand reported a 10 per cent lift in core earnings, mostly because of inroads made against competitors ASB Bank and ANZ National Bank, chief executive George Frazis said yesterday.

The bank's core earnings - its profit before impairment charges, tax and minority interests - were $884 million in the year to September 30, up from $804 million in the previous year.

"If you look at who we have gained share from, we have probably gained market share from most players, more so from ASB Bank and ANZ National," Frazis said.

"We have been counter-cyclical when everyone was pulling back," he said. "Because of that investment, that is now paying off and that strategy will continue."

Westpac New Zealand's net profit after tax came to $454 million - a 41 per cent improvement on the previous year - mostly because of a 32 per cent reduction in the bank's impairment charges for bad and doubtful debt. The bank said it had increased its market share in all major categories.

"Our growth has been balanced with home lending and deposits both growing ahead of market while margins have been well managed," Frazis said. "The focus on managing the quality of the asset book has seen impairments reduce significantly."

Home lending grew by 2.4 per cent in a market that grew by 1.2 per cent and business lending grew by 2.5 per cent when the market contracted by 0.1 per cent.

Agribusiness contributed growth of 4.5 per cent in a market that contracted by 0.8 per cent.

Retail deposits grew by 10.4 per cent against market growth of 7.8 per cent.

The bank's deposit-to-loan ratio rose to 64 per cent from 60 per cent.

Last week, the Bank of New Zealand said it had increased its market share in a number of key areas.

Westpac NZ's revenue grew by 8 per cent to $1.67 billion, with its net interest margin gaining 22 basis points to 2.33 per cent. Operating expenses rose by 5 per cent, reflecting extra investment in its distribution network.

David Tripe, senior lecturer at Massey University's centre for banking studies, said the result showed some growth, but revealed the bank's profitability, as measured by its 0.88 return on average assets, was poor.

"This is a lingering consequence of the global financial crisis so they are still, like most banks, dealing with that," he said.

The group declared a record fully franked final dividend of A80c a share, up 4c. Total dividends for the year were A156c, up 12 per cent over the previous year, and representing a payout ratio of 75 per cent. ANZ National reports its result today.