3 May 2012

The Westpac NZ momentum story continues

Westpac New Zealand* maintains momentum with a solid performance, reporting cash earnings (NPAT) of $333 million to March 31st 2012, a 14% rise on the previous half.

The result was driven by a 6% rise in core earnings to $559 million, underpinned by improved margins and a 3% lift in operating income. Improved asset quality leading to a 9% reduction in impairments also contributed.

Westpac New Zealand Chief Executive Officer, Peter Clare, announcing his first results, said the platform provided by the local operating model, on-going investment in the business and simplifying processes to make things faster and simpler for customers continues to be a winning strategy.

"Having local bankers in local communities being able to make fast and effective decisions is clearly striking a chord with customers,” Mr Clare said.

“Deposit growth has fully funded lending and margins remain well managed. Asset quality continues to improve which reflects enhancements to credit decision making processes, some improvement in the economy and our commitment to assisting New Zealanders through challenging times.”

For the half, in a competitive environment, deposits increased 4% or $1.4 billion, driven by a 6% increase in transaction and savings deposits. This lifted Westpac New Zealand’s deposit to loan ratio to 68%.

Lending increased 1% to $58.2 billion reflecting the subdued credit environment. Home lending outperformed the market, increasing 1% over the half while business lending and other personal lending were relatively constant over the half.

Margins improved to 2.43% driven by continued repricing of housing and business loans together with improved term deposit spreads.

Investment in innovation to make things simpler for customers continued. The rollout of market leading smart ATMs that provide deposit capability and 24/7 service for customers was extended and the highly regarded Cash Tank app that gives instant access to account balances was launched.

While the New Zealand market is subdued and consumer and business emphasis remains on paying down debt, growth is anticipated to increase as the Christchurch rebuild gains momentum.

Mr Clare said Christchurch remains a strong focus for Westpac New Zealand where it is a long standing and dominant figure in business and the community. Branches in Barrington, The Palms and Kaiapoi have been reopened while Westpac’s Canterbury Care Fund continues to help re-establish local community facilities and initiatives.

“We will continue to play a key role in helping the people of Christchurch and local businesses re-establish themselves and to get key business infrastructure back up and operational,” Mr Clare said.

The anticipated construction activity in Christchurch and the on-going activity in Auckland are expected to help lift the domestic economy and GDP growth through the later stages of this financial year and 2013. However, the New Zealand economy is not immune to the on-going volatility in Europe and further instability there could impact exports and funding costs.

* Westpac New Zealand is a management divisional view only, and is not the same as Westpac New Zealand Limited