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Westpac New Zealand expects to draw on the funding facilities the Reserve Bank has implemented in response to the credit crisis, but stresses that is "not a sign of weakness".
Westpac, the third major Australian-owned bank to report results in the past two weeks, posted a 6 per cent increase in underlying net profit of $484 million.
Core earnings were up 17 per cent to $883 million, driven by a 10 per cent increase in operating income, while costs were held relatively flat.
Deposits, net loans and total assets were all up by 9 per cent.
Impairment charges against loans that have gone or may go bad, however, more than doubled to $170 million.
"That just represents households particularly that have come under pressure this year," said acting chief executive Bruce McLachlan.
"It's what any bank would expect to see in an economy that's been in recession since the first quarter of this year.
"We see it as a natural outcome, not a surprise."
McLachlan said growth in customer numbers had helped to offset some of the effects the bank would otherwise have experienced.
But he was not expecting "any material improvement" in conditions for some time and impairment charges were likely to continue rising "into 2009 and potentially beyond", he said. "There's a lot of lag effects that we haven't even begun to see yet in the current environment.
"I don't think any of us quite know yet what the impact of the global downturn is going to be."
McLachlan said Westpac had sufficient funding to get through the immediate future "quite comfortably ... but if you think markets are going to stay difficult for any length of time then I believe all of the banks in New Zealand are going to need a wholesale funding guarantee to participate in the international marketplace".
He said Westpac had several funding options in the meantime, including undrawn facilities with its parent,and the Reserve Bank's various new liquidity measures including its residential mortgage backed securities facility.
Westpac had not drawn on that yet but was keen to raise "a modest amount" through that channel to ensure it worked smoothly.
"We will draw on that at some point and it won't be a sign of weakness."
Meanwhile, Australian parent Westpac Banking Corporation reported a 3 per cent rise in second-half cash profit, in line with analysts' forecasts, driven by revenue growth in the face of tough market conditions.
Australia's fourth-largest lender, which is taking over the fifth-largest, St George Bank, in a A$15.6 billion ($17.9 billion) deal, also posted a 93 per cent rise in impairment charges to A$931 million for the full year.
The result concludes the reporting season for Australian banks and while most of them have seen a significant rise in bad debts due to the credit crisis, they have not been hit as hard as many of their United States and European counterparts.
Westpac said it expected loan growth to slow and impairment charges to rise amid a gloomy outlook for the global economy.
Its cash profit in the six months to September 30 rose to A$1.89 billion from A$1.83 billion in the corresponding period one year ago. Cash earnings, effectively core profit, exclude one-offs and non-cash accounting items.
Westpac said its net profit for the full year rose 12 per cent to A$3.86 billion.
Revenue rose 10 per cent to A$11.1 billion, compared with a 7 per cent increase in expenses.
Guarantee scheme
Treasury yesterday named the first banks that have officially been accepted into the Crown's retail deposit guarantee scheme.
They are Citibank New Zealand, Kiwibank and TSB Bank.
Treasury, which has been working with the Reserve Bank on the scheme will announce only those institutions that have been approved, not those that have applied. Further announcements will be made over coming days.
