Westpac Reports 1H24 Results Amid Economic Headwinds

Highlights:

• Westpac reports a 1% decline in net profit after tax for 1H24, amidst a challenging economic environment and competitive banking sector.
• Despite economic headwinds, the bank achieved steady growth in major Australian segments, with mortgages and deposits up by 5% and business lending by 9% over the year.
• Westpac focuses on enhancing customer service and innovation, evidenced by the top-rated Westpac app and streamlined lending approval processes, while maintaining a robust balance sheet and increasing shareholder returns.

Net Profit and Margins Affected

Amidst a challenging economic landscape and stiff competition within the banking sector, Westpac (ASX: WBC) reports a measured growth and margin management strategy for the first half of 2024. The net profit after tax, excluding notable items, witnessed a 1% decline for the period, and an 8% drop compared to the previous corresponding period. Despite this, the bank managed to grow its major Australian segments steadily. Notably, mortgages and deposits saw a 5% increase, while business lending surged by 9% over the year. However, the impact of competition on mortgage margins was mitigated to some extent during this period.

Focus on Customer Service and Innovation

Westpac remains committed to enhancing its service offerings and has reaped the benefits of recent investments in this regard. The Westpac app is now rated the best in Australia. Furthermore, the bank has streamlined mortgage and business lending approval processes and upgraded merchant payment services for its business clientele.

Financial Health and Shareholder Returns

Despite the economic challenges, Westpac’s balance sheet remains robust, enabling the declaration of a special dividend of 15 cents per share fully franked and an increase in the buyback program to $2.5 billion. The interim dividend stands at 75 cents per share fully franked, marking a 7% increase from the 2023 interim dividend.

Transformation and Innovation Initiatives

Westpac has achieved a significant milestone in its risk transformation journey with the completion of all 354 activities outlined in the Integrated Plan. This transformation has positioned Westpac as a simpler and stronger institution, as noted in the final report by Promontory released alongside the results. Looking ahead, the focus shifts towards technology simplification through the UNITE program, aimed at improving customer service and lifting shareholder returns.

Economic Outlook and Customer Assistance

Acknowledging the economic strain faced by Australians due to higher interest rates and living costs, Westpac reaffirms its commitment to supporting customers in need. Despite an uptick in stress observed in loan books, the bank remains well-provisioned and believes the Australian economy is resilient, albeit with some uncertainties regarding inflation and interest rates.

Westpac’s performance amidst these challenges underscores its resilience and commitment to customer-centric growth strategies while navigating a complex economic landscape.

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