Westpac New Zealand1 Summary financial points – 1H15 vs 1H14
Cash earnings2 of $441 million, an increase of 2%
Core earnings increased 7%, to $640 million
Good Lending growth of 5% to $66.6 billion
Deposit3 growth of 6% to $51.5 billion, maintaining a peer leading deposit to loan ratio of 77.3%
Wealth balances increased 23% to $7.9 billion
Westpac New Zealand has posted cash earnings of $441 million up 2% on the same period last year.
The result was driven by core earnings growth of 7% partly offset by increased impairments coming off a very low first half 2014 charge of just $4 million.
Westpac Chief Executive Officer David McLean said it was a solid first half performance built on margin management and targeted lending and deposit growth.
“We have focused on balanced growth in targeted areas and continue to invest in digital channels and self-serve capability to make it easier and faster for customers to manage their finances,” Mr McLean said.
“Home lending and business lending are up as are deposits and we have a peer leading deposit to loan ratio of 77.3%. Overall, this puts the bank in a strong position.”
Home lending increased 5% and was in line with system4 growth with good growth in the less than 80% LVR category. Greater than 80% LVR lending now accounts for 6.6% of new flows, below the 10% regulatory limit. Business lending increased 5% driven by ongoing Agri market share gains, with growth of 9%.
Deposits growth of 6% has funded over 90% of lending growth. Transactional and at-call accounts were up 10%, primarily in online deposits.
Net interest margin (NIM) improved one basis point to 2.29% compared to 1H14. Underlying customer margins, excluding Treasury, improved three basis points to 2.53%. This improvement was driven by reduced wholesale funding costs and disciplined margin management. Deposit spreads improved due to active rate management and ongoing portfolio optimisation which more than offset reduced lending spreads which were impacted by continued market competition.
Wealth balances were up 23% to $7.9 billion driven by continued growth in KiwiSaver balances up 33%. The number of Westpac New Zealand customers with a Wealth product increased 160bps to 28.0%. A highlight was the Westpac KiwiSaver Scheme5 being rated Platinum by Super Ratings across a range of services including investment performance, fee and charges, member servicing, administration and governance.
Mr McLean said the continued focus on the customer being at the heart of the business remains a key driver for ongoing investment in digital channels and self-serve capability.
A key landmark in the digital strategy was the launch of the bank’s new internet and mobile banking platform, Westpac One, in February. Westpac One delivers customers the same experience on whatever device they choose to use - desktop, tablet, smartphone. Over 500,000 customers have been migrated to date and since February digital lending applications:
Are up 52% on average across cards, personal loans and home lending;
Now represent 40% of all applications made online; and
88% are conditionally approved instantly.
Westpac New Zealand now has 143 Smart ATMs, which is the largest fleet in the country, taking one third of all physical deposits, of which nearly 35% were outside normal business hours.
Westpac was named the country’s best retail bank in the 2015 Asian Banker Excellence in Retail Financial Services Awards as well as the “Best Bank in NZ” by the Global Finance Magazine World’s Best Banks Awards. Additionally, in April 2015, Canstar recognised Westpac as the best online bank in New Zealand.
New Zealand's broad-based economic expansion has continued, although the pace of growth has moderated slightly from the peak. Lower dairy prices will present a real challenge for some regions over the year ahead. However, the booming construction sector – not just in post-quake Canterbury – continues to support economic growth. Westpac New Zealand is well placed to grow and support all of our customers through the opportunities and challenges of this economic environment.
Westpac is also looking to capitalise on its new airpoints™ partnership with Air New Zealand. This will provide customers more choice and enhance the value of their credit cards and mortgages from 1 May 2015. Westpac has a strong proposition having built a streamlined customer online onboarding process in addition to competitive points earning incentives.
“Banking is a people business. I would like to thank all staff as this result is made possible by their on-going belief and commitment that Westpac can be one of the world’s great service companies.” Mr McLean said.