Westpac New Zealand’s first-half profit has increased 4% compared with a year earlier, even as bad debts continue to rise.
The bank reported a net profit of $545 million for the six months ended March. While this was higher than the same period last year, it marked a 19% decline compared with the six months to September.
Westpac recorded a $37 million provision for bad debts, up from $33 million a year earlier.
Chief executive Catherine McGrath said tougher conditions were expected ahead, with Westpac economists forecasting the economy to contract by 0.4% in the June quarter. They also expect unemployment to peak at 5.6% and inflation to reach 4.5%.
For the six months ended March, Westpac reported a net profit of $545 million, up from $525 million a year earlier. Net operating income rose to $1.56 billion compared with $1.5 billion previously, while expenses increased to $760 million from $734 million. The bank’s net interest margin also edged higher to 2.29% from 2.26%, and its net impairment charge rose to $37 million from $33 million.
“We’ve grown faster than the market in home and small-to-medium business lending as we compete hard to help more customers into their own homes, grow their businesses and support New Zealand’s economic recovery,” McGrath said.
“Our Westpac KiwiSaver funds are also producing strong returns, with six out of eight in the top quartile among peers for the 12 months to 31 March, and all funds above their peer median over the last two years.”
McGrath said over the past two years, Westpac has steadily expanded its lending to small and medium-sized businesses at a faster rate than the overall market.
“In October we made a $100m lending commitment to help businesses start up or scale up, of which we’ve lent more than $33m to date.
“We’re also reaching out to small businesses we’ve identified through our credit process as having more ‘headroom’ to borrow without needing to go through a full application – providing easier funding when they need it, with less red tape.”
“More broadly, before the conflict in the Middle East, New Zealand’s economy had been slowly gathering momentum.”
“While the conflict is set to push GDP growth backwards in the near term, we think the economy will pick up again when there is a resolution to the conflict and oil prices then gradually ease.”
“We know the last couple of months have been unsettling for households and businesses exposed to higher costs, especially in the transport, manufacturing and agriculture sector, as well as those who rely on cars.”
“We’re proactively contacting businesses most exposed to higher fuel costs and are helping them manage the impact.”