Westpac's New Zealand unit lifted annual cash earnings 36 per cent as it slashed its provision for bad debts, even as its interest margins shrank, eroding profitability.
Cash earnings were $322 million in the year ended September 30, compared to $236 million a year earlier, the company said in astatement.
That came as it cut its impairment charge 39 per cent to $347 million in the period. Operating earnings fell 11 per cent to $804 million as the lender's interest rate margin fell 13 basis points.
"The New Zealand business has delivered a markedly stronger result notwithstanding a local economy that is only slowly recovering," the company said in a statement. "The business delivered solid above system growth in both households and business."
Westpac's lift in local fortunes follows the trend from Bank of New Zealand and ANZ National Bank, which both increased their overall earnings after lowering their provisioning for bad debt and clawing back tax after overpaying in the settlement of the $2.2 billion structured finance tax avoidance dispute with the Inland Revenue Department.
Like its rivals, Westpac paid 80 per cent of the full amount of primary tax and interest, and recovered $106 million from the unused part of its provisioning for the case.
Even though credit quality improved, New Zealand lagged behind the Australian parent, with about 5 per cent of its portfolio under scrutiny compared to 3.2 per cent for the wider banking group.
The group lifted its net profit 82 per cent to A$6.41 billion after it halved its impairment charges to A$1.45 billion. The New Zealand unit contributed 4 per cent to the group's earnings.
The shares gained 1.7 per cent to $30.50 on the NZX.
