Westpac NZ profits down 15pc

Westpac New Zealand today revealed half year profits of $202 million, down 15 per cent on the same period last year.

The fall was due to "an increase in impairment charges due to the continued deterioration in the New Zealand economy.

Westpac NZ chief executive George Frazis, said the result reflected an "unprecedented set of external circumstances", and he expected economic conditions to continue to be challenging for some time.

"In the circumstances this is a sound result that our customers and other stakeholders should welcome," said Frazis.

Impairment charges increased by $123m to $184m, "with the continued deterioration in the New Zealand economy impacting businesses and households," said Frazis.

He said Westpac New Zealand had "responded positively to the economic challenges through investment in service teams that work with customers facing repayment difficulties."

As sales volume had dropped, some frontline staff had been redeployed into "contact programs designed to assist customers in managing early-stage financial stress."

Business lending grew 9 per cent, said the bank, mainly to agricultural infrastructure and small/medium enterprises.

"This is a particularly good outcome for the business sector during a period when banks globally have been facing difficulties as a result of the global financial crisis," said Frazis.

He said the bank had provided an additional $350m over the past 6 months to help "small businesses invest, grow and protect jobs."

Westpac's deposits grew 6 per cent, said Frazis, while housing lending grew 2 per cent.

Frazis said the first half of 2009 had seen "significant and rapid change, including further stress in the global financial sector and a material and more broad-based deterioration in global economic activity."

There was "little indication that wholesale funding costs are easing from their current high levels and the cost for retail deposits is increasing."

"While it appears some of the severe stresses of the financial crisis have now stabilised, the more dominant impact on Westpac New Zealand will be the size and duration of the recession."

Slower loan growth was expected, in part from lower consumer and lower business investment. Both consumers and businesses were expected to use the opportunity to de-leverage their balance sheets. It was also expected that more customers would come under pressure as the effects of the slowing activity became more widespread.

"We are seeing more pressure across our business customers and expect consumer stress to grow as unemployment rises. As a result we do expect impairment charges to remain at a high level throughout Second Half 2009 and into 2010," Frazis said.

- NZHERALD STAFF