WestpacTrust's earnings outpace its popularity

By RICHARD BRADDELL

Being New Zealand's least appreciated bank has not stopped WestpacTrust from becoming the most profitable one in the country.

A $409 million net profit for the September year, up from $332 million, comfortably eclipsed the banking profit record set just the day before when the Bank of New Zealand reported a profit of $389 million.

Although core retail business was relatively static, the result got a huge boost from Westpac Institutional Bank's New Zealand operation, which deals with major companies.

But WestpacTrust's result also echoed trends observed in last week's University of Auckland banking survey that showed WestpacTrust had slipped below ANZ as the bank least popular with its customers.

Group accounts released in Australia yesterday show that WestpacTrust's net profit from its retail business was barely changed at $A250 million ($333 million), with its underlying performance up a modest 3.9 per cent, after excluding bad debt provisions of $A21 million, against credits of $A12 million previously.

An $A80 million fall in retail net interest income to $A567 million also confirmed the view that WestpacTrust has lost ground in the home loan market.

But if the bank's retail performance appeared sluggish, WestpacTrust's chief executive, Tom Gallagher, was unruffled by the result.

He said that research undertaken by ACNielsen showed the banks much more closely clustered in customer satisfaction ratings than the Auckland University survey suggested.

The Nielsen survey also showed that 91 per cent of customers found the bank to be fair to excellent, with only 9 per cent saying it was poor.

A former Bank of New Zealand senior executive, Mr Gallagher must take pride in WestpacTrust's success in generating income from other financial services and the way it is heading off his former employer in some key markets.

Non-interest income in retail services was up $A25 million to $A295 million, with WestpacTrust taking the lead position in retail funds inflow. It now has $1.8 billion under management and is selling more term life than any other bank.

WestpacTrust's belated entry to online banking has also proved well-timed, with the bank now having 55,000 online customers following the launch of these services in April.

But the institutional bank operation has been the group's biggest success.

In contrast to the retail business, the Auckland University survey found large business customers very happy with WestpacTrust.

Mr Gallagher said the institutional bank was the country's number one business bank. In the past year its successes have included being the joint underwriter of the bridge financing of UnitedNetworks' purchase of Orion's gas network.

WestpacTrust's result showed the banking sector was very profitable, Deputy Prime Minister Jim Anderton said.

"If they can be so successful, it stands to reason that a Kiwi-owned bank ... can also make money."

Mr Anderton is promoting the "People's Bank," which could be approved by the cabinet before the end of the year.