Cost of living and high interest rates continue to be significant challenges for both customers and businesses in Australia. Despite these pressures, major bank Westpac has announced a strong profit. The bank’s net profit after tax for the first half of the year reached $1.8 billion, a 6 percent increase compared to the previous quarter. This positive result can be attributed to an increase in net interest income, which rose by 1.92 percent to $4.7 billion. Net interest income is a measure of a bank’s lending performance and is calculated by subtracting the interest paid to depositors from the interest earned from loans.
Westpac also experienced positive operating momentum, with a significant increase in customer deposits and loan growth. The bank saw a boost of $15.4 billion in customer deposits and $14.7 billion in loan growth. Within Australia, household deposits grew by 3 percent, while housing loans increased by 8 percent. This growth contributed to a 1 percent rise in net operating income, reaching $5.4 billion. However, operating expenses also rose by 2 percent due to higher investment spend and inflationary pressures, particularly in technology services. Non-interest income, on the other hand, fell by 4 percent due to lower financial markets revenue.
Despite these mixed results, Westpac shares saw a positive response from the market, with a 2.11 percent increase. This reaction was more favorable compared to the ASX200 index, which only rose by 0.18 percent. Westpac CEO Peter King attributed the bank’s success to its consistent focus on customer service, which has contributed to another solid quarter. The bank also prioritizes financial strength, maintaining capital, funding, and liquidity above regulatory minimums.
In relation to mortgages, Westpac’s Australian mortgage portfolio stood at $504.2 billion at the end of June 2024. Out of these mortgages, 67.7 percent were owner-occupied, while 12 percent were interest-only. Additionally, 89 percent of mortgages were on variable rates, while 11 percent were fixed. However, the bank reported an increase in mortgage delinquencies of greater than 90 days, rising by six basis points to 1.12 percent. This means that approximately 1 in 100 Australian mortgages were behind on their payments.
Westpac has also taken steps to improve the customer experience and protect customers from scams. The bank has implemented a new online ID verification process, enhanced detection of payment scams, and introduced mobile notifications to alert customers of bonus interest opportunities. This focus on customer safety aligns with calls from Financial Minister Stephen Jones for banks to strengthen controls around bank transfers to combat scams.
Other major banks in Australia have also faced challenges in the economic environment. National Australia Bank (NAB) reported a $1.9 billion statutory net profit, with underlying profit falling by 2 percent compared to the previous quarter. NAB CEO Andrew Irvine acknowledged the deterioration in asset quality and emphasized the need to prioritize customer and bank safety. The Commonwealth Bank of Australia (CBA) reported a $9.48 billion profit after tax for the full financial year. While the Australian economy remained resilient, higher interest rates were causing inflation to moderate and slow down the economy.
ANZ is expected to release its June quarter results soon, providing further insight into the performance of major Australian banks. Despite the challenges posed by the cost of living and high interest rates, these banks continue to navigate the economic landscape and prioritize customer service and financial stability.
