New image pays off for Westpac

By PAULA OLIVER

Westpac has continued a run of sizeable profits from big banks, posting $310 million in half-year earnings from a strong housing market and growth in business banking.

The bank yesterday reported its figures for the six months to March 31.

As well as the healthy profit, Westpac showed it was part of a banking trend to spend more on service.

Westpac's profit was up less than 1 per cent on the same period last year.

But its local chief executive Ann Sherry said it built on strong foundations laid towards the end of last year.

One of the main elements was a decision not to compete for business with a cut-price interest rates.

Sherry said Westpac had lifted its market share of housing loans to 19.9 per cent despite not competing strongly on price.

In the past three months it had averaged a 24.4 per cent share of housing lending growth.

As one of the country's largest banks Westpac could still be higher in share, but Sherry was happy with the result.

"You can do things short term to give you spikes, but if you really want to grow sustainably you've got to do it across all fronts, and you've got to do it in a coherent way," she said.

"This is the first time in a really long time that we've been consistently growing our market share - probably since we bought Trust Bank."

She expected mortgage growth to slow as the winter slowdown kicked in and the effect of interest rate increases was felt.

Westpac was shown in the latest KPMG Financial Institutions Performance survey, issued this week, to have the highest interest margin of any major banks.

Its profit figures yesterday showed net interest income up 10 per cent on the same period last year.

Sherry said that was partly due to higher loan volumes.

The bank's showing in the KPMG survey did not mean it was ripping customers off, she said. It was in the middle of the pack for pricing among retail banks.

She said the figures used in the survey included business banking, which had higher margins, and the bank was heavily involved in that area.

Asked if there had been any fallout from the ANZ's purchase of the National Bank, Sherry said there was some uncertainty among business customers.

"We're seeing a little bit of flow of their business customers come our way. We're watching that very carefully, and we're opportunistically talking to customers."

A big earner for the bank was its institutional division, which contributed more than $100 million to the profit figure.

Westpac's expenses were up by $25 million, or 8 per cent, on last year because of its spending on improving service in specialist areas such as migrant banking.

There was also evidence that one of its biggest public embarrassments last year - being named as the bank subject to the most complaints to the Banking Ombudsman - has been tackled.

Provisional figures showed Westpac's share of disputes in the year to June 30 was 26 per cent, compared with 38 per cent last year.

It had only one new dispute in March, and yesterday said it had no new disputes last month.

Banking Ombudsman Liz Brown said complaints were down this year, reflecting a big improvement in banks' internal procedures.

Sherry said discussions were continuing with the Reserve Bank over Westpac's refusal to submit to requirements that it incorporate as a local business rather than operate as a branch of its Australian parent.

Westpac had put forward two proposals which were now being considered.

The bank wanted an alternative to incorporation, because that could cost it hundreds of millions of dollars in tax.

A direction should become clear in June or July.