Westpac's first-quarter profit rises 33 per cent

Westpac has led Australia's four biggest banks in raising borrowing costs. Photo / Richard Robinson

Westpac, Australia's second-biggest lender, said fiscal first-quarter profit climbed 33 per cent as it sold more loans and fewer customers defaulted.

Unaudited cash earnings in the three months to December 31 rose to about A$1.6 billion ($2.03 billion) from A$1.2 billion a year earlier. Westpac shares rose the most in over a year.

Impairment charges in the quarter slumped about 50 per cent as economic recovery eased pressure on borrowers struggling to meet repayments.

Chief executive Gail Kelly, while reiterating that funding costs would continue to rise, said yesterday that the bank gained market share across the group, from home loans to retail deposits.

Results for the New Zealand operation were not broken out.

"We're over the top of the bad-debt cycle," said Peter Vann at Constellation Capital Management in Sydney. "They're substantially passing through increased costs of funding."

Westpac said lending grew 1.7 per cent from September, led by its mortgage business. An A$400 million impairment charge in the final three months of 2009 compared with about A$800 million in the same period of 2008, and Its shares rose yesterday by A$1.44, or 6.18 per cent, to A$24.74.

Westpac has led Australia's four biggest banks in raising borrowing costs after the central bank increased interest rates three times since October.

Growth in Westpac's mortgage market share had shown a "modest easing" since early December, when the top four banks started offering a broader range of prices on home loans, Kelly said.

While she said "the worst of the crisis" was behind the bank, Westpac bolstered its capital buffer in the period and said defaults on some unsecured consumer loans would swell, trailing an increase in unemployment in 2009.

"We've got a large portfolio of stressed assets still on the book," chief financial officer Phil Coffey said, cautioning against calculating a fiscal-year impairment based on first-quarter figures.

"It would be dangerous to annualise that number. It's too early to declare victory."

The bank's Tier 1 capital ratio, a measure of its ability to absorb losses, rose 38 basis points, or 0.38 of a percentage point, to 8.5 per cent.

- BLOOMBERG