Westpac New Zealand Chief Executive Catherine McGrath. Photo / Mark Tandrum
Westpac NZ chief executive Catherine McGrath said the bank was contacting 1600 cash-strapped customers a month as the economy edged closer to what it expected to be a hard landing.
The bank had earlier reported 33
Net profit fell to $426 million for the six months to March – driven in part by the financial impact of severe flooding in the North Island.
McGrath said the bank’s underlying performance remained stable.
At a group level, Westpac’s half-year profit came in at A$4 billion ($4.28b), up 22 per cent on the first half of the previous financial year.
Westpac NZ contributed to the drop in net profit last year due to repeated non-sales of Westpac Life and increased impairment provisions, including an overlay for the financial impacts of severe weather in the North Island.
McGrath told the Herald that the bank’s data and modeling indicated the economy was heading for a more challenging period and accordingly raised its net impact charge to $154m (from $10m a year earlier).
The bank is already seeing many customers where the financial strain is already starting to show, McGrath said.
He urged customers who start worrying about liquidity to contact the bank “because the sooner we can talk to people, the more tools we have at our disposal.
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„What we tell people is, start thinking about your borrowing costs, and start thinking about whether your outgoings are coming out faster than your intentions.”
Westpac contacted 1600 customers a month – people identified through the bank’s modeling – when it saw liquidity tightening.
„What we all have to recognize is when inflation is at its peak – it’s still higher than most people have seen before.
“We’ve seen (official) interest rates rise to levels I’ve never seen before, and we expect a rate hike.
„So the combination of those things has us having more tricky times,” he said.
Westpac’s net interest margin – a broad measure of a bank’s performance – rose 14 basis points to 2.10 percent, but was below some of its peers and lower than pre-Covid levels.
In response to the comment about bank profitability being too high, McGrath said: “I accept that as a sector and as a bank we have had strong profitability.
„As I see myself going through very difficult times, it’s incredibly important to ensure that profitable and well-capitalized banks have the resilience to support customers through the economic cycle,” he said.
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At its conclusion, excluding the sale of Westpac Life and other significant items, its net profit fell 15 per cent compared to the same period last year.
There was positive momentum during the reporting period.
McGrath said there was still a lack of clarity on several key issues for homeowners and businesses hit hard by Hurricane Gabriel and flooding in the North Island.
“Once the vision is clear, we can work with our customers to agree the best way we can support them for the long term. Due to the current uncertainty, we have developed an overview of weather event impact.
Westpac economists and others are predicting a recession this year.
„The global outlook remains uncertain and financial markets are circling,” he said.
„Furthermore, inflation and consumer spending remain high, increasing the risks of a hard landing.”
The group declared a dividend of up to A70c, fully transparent, 15 per cent.
Westpac Group’s return on equity rose 205 basis points to 11.3 percent.
Group chief executive Peter King said: „The first half results reflect the progress made in becoming a simpler, stronger bank.
„Regular costing and margin management have allowed us to increase our return on equity and increase the dividend to A70 cents per share,” he said.
“We have grown decently in mortgages, done well in commercial and institutional banking and continued to practice risk management and simplification.
„Our balance sheet strength means we are well positioned to support customers as they grow and navigate any future economic challenges,” he said.
„Many customers are adjusting to the increase in reimbursement, and we are ready to help those who need time to transition.”