Westpac ready for the slowdown

By GARETH VAUGHAN

Westpac's New Zealand arm is bracing itself for the impending housing market slowdown while reporting it more than held its own last year.

The bank's New Zealand chief executive, Ann Sherry, said yesterday that customer satisfaction, market share and profitability remained strong or were improving.

Net profits in the year to September 30 rose from $581 million to $617 million. It won 20.8 per cent share of new house loans, boosting its share of the key home loan market to 20.1 per cent and placing it third behind ANZ National Bank and ASB Bank.

But growth in overall home lending is slowing. New home loans totalled less than $1 billion a month in August and September, after topping $1 billion for each of the previous 10 months.

Sherry said the market was likely to continue slowing but "won't tank".

Late last month, the Reserve Bank raised interest rates 25 basis points to 6.5 per cent. It was the sixth hike this year.

Sherry said the latest rise was yet to hit the housing market.

"The housing market will probably come off a bit more [but] we're not talking about it falling off a cliff."

Westpac was watching a BNZ-led price war in the fixed home loan market closely but did not plan to "chase price" itself.

BNZ is running an "unbeatable" campaign and offers 7.15 per cent on two-year fixed home loans. Westpac offers 7.4 per cent.

Sherry said customers were still looking for value over time aside from merely the lowest price.

"We've already got a lot of customers. We don't have to buy customers on price. We do want to hold the customers we already have and ... to grow our housing book, at least our share of the market."

David Tripe, senior banking lecturer at Massey University, said Westpac might lose a bit of business in the short term with this strategy but it would probably be beneficial in the long run. Tripe suggested BNZ could be hit with "profitability impacts".

Westpac's net interest income rose to $1.09 billion from $1.03 billion boosted by higher loan and deposit volumes.

Non-interest income rose to $591 million from $538 million and the bank's cost to income ratio improved to 48 per cent from 51 per cent.

Sherry said Westpac now had a market-leading 25 per cent of the small and medium-sized business banking market. That is up from below 20 per cent two years ago.

Outflows from BT Financial Group, Westpac's troubled fund management business, had slowed and the performance had turned around.

At the counter

* Net profit rose from $581m to $617m.

* 20.1pc share of home loan market - third overall.

* 25pc share of small to medium-size business banking - market leader.

* Offers 7.4 per cent on two-year fixed home loans.