Westpac, one of Australia’s big four banks, has reported a net profit of $1.5 billion in the first quarter of 2024, resulting in a rise in shares. While this profit is down 6 percent from the second half of 2023, it is attributed to notable items related to hedge accounting that will reverse over time. Despite this decline, Westpac’s CEO, Peter King, described the results as a “solid quarter” and emphasized the bank’s strong financial position.
In terms of the bank’s mortgage business, Westpac holds a portfolio worth $490.9 billion, with the majority being owner-occupied loans. The bank reported that 32 percent of customer accounts are ahead on repayments, while 23 percent are on time. However, there has been a rise in 90+ day mortgage delinquencies, reflecting the tougher economic environment. Westpac remains committed to supporting customers facing high cost-of-living pressures and helping them manage household budgets.
Looking ahead to the economy, Mr. King expressed hope that the Reserve Bank of Australia’s monetary policy will become less restrictive in the coming year. He expects the economy to remain resilient, supported by low unemployment and healthy corporate sector balance sheets. This, combined with a slowdown in economic growth and decreasing inflationary pressures, should provide scope for monetary policy to be less restrictive.
Despite the decline in net profit, analysts have responded positively to Westpac’s results. Citi analyst Brendan Sproules described them as “reassuring” for investors, as the bank has regained balance sheet momentum and its mortgage and household deposits are growing in line with the system. E&P capital analyst Azib Khan also noted that there is nothing concerning about Westpac’s asset quality at this stage and that its capital position remains strong.
In related news, Commonwealth Bank of Australia reported a statutory net profit after tax of $4.8 billion in the first half of the 2024 financial year, which is an 8 percent fall. The bank’s CEO, Matt Comyn, acknowledged the challenges faced by customers in absorbing the cost of living pressures. He mentioned that while the economy has remained fairly resilient, downside risks are building due to slowing demand, persistent inflation, and ongoing geopolitical tensions.
Overall, Westpac’s solid performance in the first quarter of 2024, despite a decline in net profit, reflects the bank’s commitment to prudent management and supporting customers in a challenging economic environment. With positive responses from analysts and hopes for less restrictive monetary policy, Westpac appears to be navigating the current financial landscape effectively.
