Westpac’s profit comes in line with estimates of rising rates and cost cutting
(Bloomberg) — Westpac Banking Corp.’s earnings was in line with analysts’ estimates as rising interest rates and further cost cutting supported profitability.
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Cash receipts fell to A$5.28 billion (US$3.38 billion) in the year ended September 30, according to a statement from the Sydney-based lender on Monday. That was in line with the median expectation of A$5.25 billion in a Bloomberg poll of 12 analysts.
Australia’s largest banks are reaping the rewards of higher interest rates, which are part of a global trend towards higher borrowing costs that are boosting lending profitability. However, with the economy expected to slow next year and fears of an accelerating housing market downturn, investors are on the lookout for signs of fiscal stress that could weigh on the outlook for banks.
“After the work of the last two years, Westpac is now a simpler, stronger bank,” Westpac Chief Executive Officer Peter King said in the statement. “We continue to reduce our costs.”
While mortgage rates are rising rapidly this year, there is still little sign of pain for borrowers, although term home loans are likely to mature next year and the impact of higher rates will be felt more, King said.
“We’re not seeing an increase in hardship or stressed assets yet,” he said. “Many customers have accumulated savings over the past two years and 68% are in arrears on their mortgage payments. However, it is inevitable that the impact of higher interest rates will be felt even as borrowers roll over low fixed-rate loans.”
Westpac revised its 2024 cost target to A$8.6 billion and said costs are expected to be between 0% and 2% lower in the first half of 2023. As part of CEO King’s effort to simplify the bank, Westpac said it has completed or announced the sale of nine companies.
The company pays a final dividend of 64 Australian cents per share.
Rival National Australia Bank Ltd. is expected to release its results on Wednesday, while Australia & New Zealand Banking Group Ltd. Last month saw the start of earnings season for the largest lenders.
(Adds details on mortgage prospects, costs from paragraph 5.)
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