Westpac in good shape for future, says CEO

CEO Ann Sherry thought Westpac's result was solid in the context of a price war in the mortgage market during the half-year. Picture / Fotopress

Westpac posted a 4 per cent rise in half-year profit in New Zealand yesterday and said it was well placed to cope as economic growth slowed.

The bank's profit in the six months to March 31 rose to $323 million from $310 million in the corresponding previous period, with non-housing lending almost doubling to $1 billion.

Chief executive Ann Sherry said the result was solid in the context of a price war in the mortgage market during the half-year, with mortgage margins down 16 basis points.

In the run-up to Christmas, Westpac held its advertised two-year fixed home loan interest rate at 7.4 per cent as rivals, led by the BNZ and ASB, dropped theirs below 7 per cent.

Its share of mortgage market growth fell from 20 per cent to 13 per cent during the price war but lifted again to 17.2 per cent in March.

"Even though we've had the short-term pain, I think that, over the long term, the fact that we've been able to get the volume back and the share back will stand us in good stead," said Sherry.

Westpac's residential lending book rose 7 per cent to $20.1 billion, which it says is 19.25 per cent market share. Housing lending delivers 20 per cent of Westpac's revenue.

Business lending increased 8 per cent to $10.1 billion and deposits rose 7 per cent to $19.3 billion.

Westpac's funds under management, including the BT Funds Management business, slipped to $2.3 billion from $2.5 billion.

Australian parent Westpac Banking Corp's report said the New Zealand business had experienced an increasingly competitive operating environment with falling cash earnings, moderating asset growth, weaker lending margins and increasing bad debt charges.

However, Sherry said when one part of the market slowed - business banking, housing or retail - Westpac could drive growth through another.

She said Westpac's dispute with the Inland Revenue Department over retrospective tax was "clearly" heading to court.

The department claims Westpac owes up to $647 million in back tax stemming from structured finance transactions which gave favourable tax treatment to money channelled to a foreign borrower through New Zealand.