Westpac adds to bank sector's profit run


Westpac CEO David Morgan said the bank was on track for double-digit growth

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Australia's No. 3 bank, Westpac Banking Corp, continued the sector's strong profit run Thursday, unveiling a record interim net profit of $550 million (Aust. $1.018 billion).

Westpac said the result, for the six months to March 2002, was up 10 percent over the corresponding half last year and came despite a sharp increase in its provision for bad and doubtful debts.

Chief executive David Morgan said the bank was well positioned to meet its goal of "continued double-digit earnings growth".

He said the economies of Australia and New Zealand should enjoy solid growth for the rest of the financial year, but warned that interest rates were likely to rise in the second half of 2002.

Shares in Westpac weakened slightly after the earnings announcement, falling 1.1 percent to A$16.22. They touched a record high of A$17.01 in early February.

Record from ANZ

Westpac's result follows last week's record interim net profit of $571 million (A$1.05 billion) from fourth-ranked ANZ Bank for the same half-year to the end of March.

That result was up 17.3 percent from the previous period last year.

Westpac said the increase in its bad debt provision to A$271 million reflected a "small number of well-publicised problem corporate exposures". These included Enron, zinc miner Pasminco and Swissair.

Westpac also confirmed Thursday the sale of its consumer credit arm AGC to GE Capital for $891 million (A$1.65 billion), representing a profit of about $400 million.

Last week Westpac announced it would spend $175 million (A$323 million) to buy the $5.5 billion funds manager, Rothschild Australia Asset Management.

NAB next to report

Australia's biggest bank, the National Australia Bank, will report its results next week on May 9. Last month it said it would cut more than 2000 jobs over the next 18 months as part of a review designed to lift earnings per share by 12 percent in the 2003-04 business year.

The NAB's performance had been under a cloud since announcing it lost almost $2.3 billion at its U.S.-based HomeSide Lending unit last year.

It sold HomeSide for $1.9 billion in December, after unveiling a 36 percent fall in net profit to $1.06 billion (A$2.08 billion) for the year to September 2001.

Commonwealth Bank of Australia, the No. 2 bank by market capitalization, reported an operating profit of $1.22 billion (A$2.26 billion) last August for the year to last June 30, and said in November it was on track for double-digit growth in 2001-02.

Fifth-ranked St George Bank, which is much smaller than the "big four" of Australian banking, reports on May 7. UBS Warburg is forecasting an interim net profit result for the bank of about $156 million (A$289 million).