Westpac New Zealand1 cash earnings2 increased 17% to $432 million for the first half of FY14 against the same period last year.
Chief Executive Peter Clare said, this is a strong performance in a competitive market and will allow our continued focus on investment, especially in our self-service and digital channels.
The result was driven by a modest increase in revenue, well managed expenses, improving asset quality and a further strengthening of the balance sheet.
“In a highly competitive environment we have concentrated on meeting customer needs through focused investment and simplifying processes. As the economy gains momentum we are well positioned to support its future growth.”
“Investing in innovative products and customer self-service digital channels is a priority for us as customers rapidly change the way in which they interact with us,” Mr Clare said.
Lending increased 6% over the 12 month period with strong growth in mortgages (6%) and business lending (5%) both ahead of market. Mortgage growth was focused on quality lending with the majority of growth in the below 80% LVR category. Additionally, business lending growth of 5% included new business origination, partly offset by the continued reduction in business stressed assets.
Deposits3 grew 8%, which more than fully funded loan growth and resulted in a peer leading deposit to loan ratio of 77%. Online deposit products underpinned this increase with over half of all deposit growth coming through a digital channel.
The ongoing switch by customers to fixed rate mortgages and strong price competition has driven lending spread compression. These trends were partly offset by improving deposit spreads, resulting in a reduction in net interest margin, down 6 basis points to 2.28%.
Funds under management and administration in the wealth business grew strongly, up 19% to $6.4 billion. This was driven by 31% growth in KiwiSaver. Positively, the Westpac KiwiSaver Scheme has been named one of nine default KiwiSaver schemes which will come into effect on 1 July 2014.
Customers are embracing the convenience that the investment in self-service digital channels is delivering. During the last 12 months, 14% of all home loan applications were made online with nearly half of those ‘new to bank’ customers. Showing how broadly Westpac’s online functionality is extending during the first half of 2014, over 33,000 international money transfers, the combined value of which is almost $250 million, have been made by customers online.
Further growth in customer self-service behaviour is expected to continue as additional capability is added. The rollout of New Zealand’s first fully device responsive internet banking platform will be completed later this year. The new platform provides the same functionality and customer experience irrespective of which online or mobile device is used by the customer. This will allow customers to purchase, fulfil and service more than 90% of products which currently require a physical branch visit to complete.
Mobile banking also continues to grow with a 44% increase in customers using mobile banking since 31 March 2013 and the ground breaking balance request application Cash Tank is now answering nearly 5 million customer balance requests per month.
“Customers like the convenience, control and consistency these new self-service channels provide and we have a well-defined road map to extend the capability with our objective of being the leading digital bank in New Zealand,” Mr Clare said. Our progress in this regard has been recognised by FINALTA4 stating, “Westpac NZ is amongst the leaders in driving uptake of digital banking.”
Some additional achievements during the period include:
Granted market makers licence by People’s Bank of China for direct interbank trading of NZD/CNY
Recipient of Canstar 5 star rating for Choices Offset and Choices Everyday mortgage products
Symphony Customer Relationship Management (CRM) programme won five NZ Direct Marketing Gold awards for CRM, data management and direct marketing for financial services.
New Zealand’s economic indicators continue to improve. The Canterbury post-earthquake rebuild is accelerating. Rising house prices have also boosted consumer and small business confidence. Conditions for primary exporters (especially dairy) have improved significantly, with a post-drought rebound in production coinciding with strong international demand and resultant global export prices. Westpac New Zealand is well placed to grow and support all of our customers through the channels of their choice in this improving environment.