Westpac’s quarterly profit rises, shares touch record high on loan growth

By Sameer Manekar

Feb 13 (Reuters) – Westpac Banking Corp’s shares hit a record high on Friday after Australia’s third-largest bank by market value beat first-quarter profit estimates and forecast resilient credit demand.

The bank reported first-quarter unaudited net profit of A$1.9 billion ($1.35 billion), 6% higher than the average of the prior two quarters, and about 5% ahead of the Visible Alpha consensus, as per Citigroup.

That was driven by solid deposit and loan growth, with Westpac adding A$12 billion in deposits and A$22 billion in new loans during the quarter, cushioning margin pressure.

“We are optimistic on the outlook for the economy and expect demand for both business and household credit to remain resilient,” CEO Anthony Miller said.

Westpac shares jumped 2.8% in early trade to a record high of A$42.130.

“With costs well managed, asset quality benign, and capital strong, we think the result will be well received,” analysts at Citi said, calling the results and the quarter “solid”.

Earlier in the week, larger rival Commonwealth Bank of Australia reported market share gains in home loans, business loans, and deposits, which helped it post a record first-half performance.

However, intense competition among lenders to attract borrowers in a low-interest-rate environment has been pressuring their net interest margins, a key profitability metric that measures the spread between loan yields and deposit costs.

For the quarter ended December 31, Westpac’s core net interest margin slipped 3 basis points to 1.79%.

Credit quality remained strong, with fewer borrowers falling behind on repayments as mortgages overdue by more than 90 days fell to 0.58% from 1.03% a year ago.

The share of loans showing signs of stress also eased to 1.17% of total lending, the lowest since June 2023.

Westpac’s common equity tier 1 (CET1) ratio, a key measure of capital adequacy, stood at 12.3% at year-end, down 23 basis points from September-end.

($1 = 1.4102 Australian dollars)

(Reporting by Sameer Manekar and Sneha Kumar in Bengaluru; Editing by Krishna Chandra Eluri and Rashmi Aich)