CANBERRA: Westpac Banking Corp expects a pickup in business lending to help prop up earnings this year amid a slowing housing market. Australia’s second largest lender on Monday lifted its full year cash profit three per cent on the back of increased home loans, but is bracing for weaker mortgage lending ahead.
Westpac, which in October became the first lender to push home loan rates higher, reported full year cash profit of $7.82 billion. Its statutory profit was up six per cent from a year earlier to $8.01 billion.
“We continue to operate in a lower-for-longer environment with modest credit growth, intense competition, and some ongoing regulatory uncertainty,”, chief executive Brian Hartzer told analysts.
However, he tempered the caution, saying the bank was seeing signs of improvement in business investment, helped by low interest rates and a weaker Australian dollar. “We are seeing good growth in the non-mining related sectors, particularly services like tourism, education and health,” Mr Hartzer said.
Reserve Bank of Australia data last week showed private sector credit rose at an annual rate of more than six per cent in September, the fastest pace in several years. At the same time, growth in credit for housing is slowing.
On Monday, Westpac said its total lending for the year rose seven per cent, mainly powered by home loans in Australia, which rose 7.0 per cent from a year earlier. Personal loans rose 5.0 per cent, while business lending increased by 6.0 per cent.
Its net interest income rose six per cent to $14.2 billion. However, its net interest margin, a key gauge of profitability, remained flat. Loan impairment charges rose 16 per cent.
Morningstar analyst David Ellis said any improvement in business lending would benefit all the big four banks, including Westpac. At the same time, he expects a modest decline in the growth of home loans, as more investor loans are gradually replaced by owner-occupier mortgages.
Westpac had unveiled the full year preliminary results in October, when it announced a $3.5 billion equity raising to help bolster its balance sheet in line with stricter regulatory capital requirements. In October, both National Australia Bank and ANZ posted record cash profits, but missed analyst expectations.
