Westpac predicts strong 2005 results

Westpac Banking Corp has unveiled an upbeat outlook for 2005, saying it is in line with its plans for the first two months of the financial year and expecting to deliver strong full year results.

Chief executive David Morgan told shareholders in Auckland today that the company was on track with its plan for the first two months of 2005 despite a more intense competitive environment.

"As I stated at the announcement of our recent full year profit result, we expect to continue to deliver strong results at the upper end of the banking sector in 2005," Mr Morgan said.

Chairman Leon Davis said the bank was in excellent shape.

"And we are well positioned to take advantage of future growth opportunities," Mr Davis said.

Westpac has had a great year, he said.

"Importantly, over the past five years, we have delivered an 18 per cent compound annual return to shareholders," Mr Davis said.

"Given this momentum in our business, your board remains positive on the outlook for 2005."

Mr Davis said Westpac was holding the annual general meeting in New Zealand to highlight the importance to the bank of its operations across the Tasman.

The meeting comes a day after the Reserve Bank of New Zealand (RBNZ) forced Westpac to agree to incorporate in New Zealand rather than run its operations there as a branch.

Westpac NZ, originally known as the Bank of New South Wales, first entered that country through the acquisition of five branches from the Oriental Bank in 1861, he said.

"In recent times, the Reserve Bank of New Zealand, which regulates and supervises our New Zealand banking operations, has taken a policy position that systemically important banks in New Zealand should be incorporated," Mr Davis said.

"The Reserve Bank believes that local incorporation is necessary to prevent significant damage to the financial system in the event of problems in a parent bank or the failure of a bank."

Westpac's buttressed branch proposal did not satisfy the RBNZ it could meet all of their objectives or concerns relating to failure management, he said.

"As a result of the Reserve Bank's rejection of our proposal, the Board has agreed to incorporate the key parts of our New Zealand banking operations," Mr Davis said.

This will involve establishing an incorporated New Zealand subsidiary with its own board.

Mr Davis said recent Australian tax law changes relating to the tax treatment of goodwill will mean that there should not be any capital gains tax liability from the transfer of assets to the subsidiary.

"While we are not yet in a position to fully quantify the costs of our local incorporation, we anticipate that they will not materially affect earnings," he said.

Westpac was still in dispute with the NZ Inland Revenue Department which previously issued it with amended assessments for various transactions from the 1999 and 2000 financial years.

It disclosed in August 2004 the maximum potential tax and interest liability from these transactions was $647 million for these years.

"However, given the strength of our position, we have not provided in our accounts for these amended assessments," he said.

Mr Morgan told shareholders that over the past five years in Australia, the bank had restored its position in business banking and increased its market share by more than two and a half percentage points.

"I ... have no doubt that the changes across Westpac over the last five years have placed us firmly on the path to a sustainable competitive advantage and more resilient earnings growth," Mr Morgan said.

"We are now undoubtedly a long way down the track to realising our potential across the board."

- AAP