Westpac Bank annual net profit slides seven percent

Australian banking giant Westpac posted a seven percent slide in annual net profit Monday on the back of market headwinds and impairment charges but said it was well positioned with a strong balance sheet.


Westpac's Aus$7.45 billion (US$5.72 billion) result in the year to September 30 rounded out annual reporting from three of the nation's big four lenders, with all battling regulatory changes and rising bad loans.


Cash profit at the nation's second largest bank, the measure more closely watched by analysts which strips out volatile items, was flat at Aus$7.82 billion, in line with expectations.


Despite rising bank funding costs and tougher capital rules, it paid a dividend of 94 cents, in line with what shareholders received in the first half of the year.


But in an acknowledgement of current market conditions, chief executive Brian Hartzer said the bank would trim its return on equity target down from 15 percent to 13 or 14 percent in the medium term.


Hartzer called it "a solid result in a challenging environment".


"We are continuing to deliver our service-led strategy, increasing customer numbers, delivering world-leading digital services, and supporting more customer needs," he said.


"At the same time we have strengthened our balance sheet, carefully managed margins, and achieved Aus$263 million in productivity savings, while increasing our investment in digital and other service initiatives.


"The result demonstrates our consistent approach to managing our core franchise over many years, including the discipline we apply to balancing growth and returns."


The bank saw a Aus$371 million, 49 percent, rise in impairment expenses compared to the previous corresponding period, which hurt net profit.


But Hartzer said Westpac was well funded moving forward, having raised around Aus$3.5 billion through an entitlement offer during the year.


"Our healthy capital level positions the group well for any further regulatory changes, while ensuring we can continue to support both customers and economic growth in Australia," he said.


Westpac was the last of the big banks to report in the current cycle.


ANZ last week posted a 24 percent drop in net profits to Aus$5.7 billion on the back of restructuring costs as it puts more emphasis on Australia and New Zealand and less on Asia.


The week before, National Australia Bank's net profit dropped 94.4 percent due to writedowns, including of British asset Clydesdale. But its cash profit rose 4.2 percent to a better-than-expected Aus$6.48 billion.


Australia's largest bank, the Commonwealth, operates on a different reporting schedule.


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