Westpac to deliver another tidy profit

SYDNEY - Westpac Banking Corp is expected to deliver another record half-year net profit this week, bolstered by strength in its business lending.

But Westpac's home lending is expected to be weaker than the other major banks and analysts are keen to learn what's being done to fix the problem.

Analysts expect Westpac to report a 10 per cent jump in interim net profit to A$1.35 billion ($1.45 billion) on Thursday.

"They should do well because their business banking arm should be the driver of the business," said D&D Tolhurst analyst George Galanopoulos.

"That should offset any concerns about their performance in the housing space."

Westpac has been lagging the rest of the market in home loans, growing at about half the rate of its competitors.

This has been blamed on a combination of productivity issues at its branches and a deliberate strategy by the bank to switch its attention from lower margin home loans to higher margin business loans.

The bank has also shunned low-documentation lending, which accounts for about 10 per cent of home loan flows for the industry overall but only one per cent for Westpac.

"It's really a deliberate attempt to be less aggressive and really focus their strengths on business banking, which is actually more robust than housing," Mr Galanopoulos said.

"While housing is not doom and gloom by any means, it's in a slowdown phase.

"I think they just basically tried to grow the quality end of their business and they don't want growth for the sake of growing.

"If you're too aggressive, you're going to erode your margins."

JP Morgan's Brian Johnson said he believed the market may have been too harsh on Westpac over its home loan market share losses.

"It's a little bit unfair. Market share doesn't equate to profitability," he said.

That said, he believed that Westpac's housing performance had still been "disappointing".

Analysts are hoping Westpac chief executive David Morgan will this week provide more information on what remedial action the bank will take to lift its game in home lending.

Investors will be looking for a change to Westpac's dividend policy, under which it currently increases dividends by two cents each half year.

"They generate enough capital to be able to lift that," Mr Johnson said.

More broadly, the market is hoping for specific outlook guidance from Westpac.

The bank has previously forecast that its earnings per share growth would be at the upper end of the sector for the full year.

Westpac's net profit for the first half last year was A$1.225 billion.

- AAP