Westpac's annual net profit has fallen by 18 percent, despite investment in customers

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Photo: RNZ / Nate McKinnon

Westpac New Zealand’s full year net profit fell 18 percent, reflecting increased compliance costs and a slow down in activity, amid high interest rates and inflation.

“Substantive tightening in monetary policy combined with higher inflation have led to a significant slowing in activity,” the bank’s Australian parent said in its annual report.

Key numbers for the 12 months ended September compared with a year ago:

Net profit down $963m $1.05b
Revenue $2.77b vs $$2.71b
Underlying profit $1.48b vs $1.56b
Expenses $1.29b vs $1.17b
Impairment charge $135m vs benefit $27m
Net interest margin 2.11% vs 2%

Westpac NZ chief executive Catherine McGrath said the bank had invested heavily in helping customers through difficult times, while strengthening its core business for growth.

“Throughout the year we’ve stepped up to help New Zealanders through a range of immediate challenges and set them up for the longer term,” McGrath said.

“Following this year’s severe weather events, we provided $3.9 million in direct support to customers and to the community and iwi groups who were providing relief.”

McGrath said the bank was also assisting customers with an increase in cyber crime, with investment in technology designed to reduce risk.

“Fraud and scams are impacting many New Zealanders’ lives. Recently, we became the first New Zealand bank to partner with Biocatch, a global cybersecurity company that analyses customers’ online behaviour to help detect unusual activities and protect them against financial crime.”

While the bank’s expenses were up 12 percent, total customer deposits rose 2 percent, with home lending up 3 percent.

Business lending rose by 2 percent.

“With housing affordability still a hurdle, we helped 5,565 Kiwis into their first home – a 7 percent increase on the previous year,” she said.

“During the low interest rate period of two to three years ago, many homeowners built up a savings buffer and most now remain well placed to manage interest rate rises.

“Hardship levels remain low and the number of homeowners behind on repayments has reduced over the past six months.”

Funds under management in the Westpac KiwiSaver Scheme rose 11 percent to$9.85b as at 30 September.

McGrath said severe weather and climate-related impacts continued to be a key concern for customers and stakeholders.

To that end, Westpac lent $1b to farmers and $41m to businesses through its sustainable loan scheme, launched in June.

Economic outlook

McGrath said New Zealand was heading into a difficult phase of the economic cycle, but remained well-positioned compared to other economies.

“Last week our economists released their quarterly economic overview showing subdued growth likely throughout 2024, with uncertainty over higher long-term interest rates and weakness in our key trading partners, most notably China,” she said.

“Overall, it’s a mixed bag, but there are lots of reasons to remain optimistic for our customers and Aotearoa New Zealand as a whole.”

Westpac’s Australian parent Westpac Group’s full year net profit rose 26 percent to A$7.195b.