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Westpac lifts profits to record $1.19B
By Geoff Hiscock
SYDNEY, Australia (CNN) -- The smallest of Australia's big four lenders, Westpac Banking Corp., continued the sector's strong profit run Thursday, lifting full-year net profit 15 percent to a record A$2.19 billion ($1.19 billion). The bank also said it had cleaned up its balance sheet ahead of a changed business mix, and said it expects to deliver underlying earnings growth of 7 to 9 percent in 2003. But Westpac, which ranks behind National Australia Bank, Commonwealth Bank of Australia and ANZ Bank in terms of profitability and market capitalization, has warned of uncertainty ahead because the global outlook "remains volatile." Westpac shares are 2.7 percent higher at A$14.04 in early afternoon trade, outperforming the banking sector and the benchmark S&P/ASX200, which is up about 0.5 percent. Along with its core banking business, Westpac is seeking to reposition itself as a major player in wealth management, buying up the Australian Rothschild business and the BT Financial Group in the past year. It has also taken a 51 percent stake in Hastings Funds Management. Clearing the decksA feature of Westpac's result is a total of $312 million in charges the bank took covering integration expenses, outsourcing expenses, investment writeoffs and changes in accounting standards. "These changes clear the decks, taking risk out of the balance sheet and improving transparency for the market," Westpac CEO David Morgan said Thursday in a statement to the Australian Stock Exchange. Morgan called the changes "prudent" in the light of the bank's new business mix. Morgan said there would be some near-term earnings dilution as a result of the bank's repositioning, but earnings per share should still grow by up to 9 percent next year. Earlier this month, ANZ Bank reported a 16 percent lift in net profit before one-off items of a record A$2.17 billion ($1.2 billion). Like Westpac, it warned of tougher times in 2003 and said achieving its 10 percent-plus growth target for earnings per share would be challenging. The Westpac and ANZ results were broadly in line with consensus forecasts. NAB result due next weekNational Australia Bank, the country's biggest bank, is due to report on November 7 for the full year to September 30. In May it beat expectations with a record first-half result of A$2.256 billion ($1.22 billion). (Full story) Earlier this month, it confirmed it had made another unsuccessful offer for British bank Abbey National. The NAB, which already owns the Clydesdale, Northern, Yorkshire and National Irish banks in the United Kingdom, has been keen to expand its customer base there because Australian government policy prevents it from buying any of its big rivals at home. Commonwealth Bank, the No. 2 bank by market capitalization, follows a different financial year and reported in August, when it posted a record net profit of A$2.655 billion ($1.45 billion) for the year to June 30. (Full story) Its CEO, David Murray, said then that the bank was operating in an environment characterized by increasing concern about share market volatility, particularly in the United States. Since August, global equity markets have dipped further, though the United States has seen a slight recovery in recent days. The U.K. equity downturn has been particularly painful for another of Australia's main financial groups, life insurer and funds manager AMP Ltd., which was forced to dump its CEO last month after a dramatic plunge in the company's share price. (Full story) AMP stock was driven down by concerns about the company's disclosure and handling of troubles in its Pearl business in Britain. On September 30 AMP confirmed Andrew Mohl as its permanent CEO, after Paul Batchelor stepped down a week earlier.
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