Rate rise helps Westpac lift quarterly profit above $2b
Westpac notched up over $2 billion in profits during the last three months of 2018, 6.8 per cent more than in previous quarters, helped by wider margins and lower costs for compensation.
The country's second-largest bank reported unaudited cash earnings in the December quarter of $2.04 billion, which compared with a quarterly average of $1.91 billion in the previous six months.
Westpac's trading update on Monday came as Bank of Queensland flagged that its earnings would be up to 9 per cent lower this half, due to a slump in its fee income. BoQ, which reports its results in April, said on Monday that based on current performance, it was on track to make $165 million to $170 million in the half, compared with $182 million last year.
While Westpac profits rose, it said earnings in the previous half had been bogged down by compensation costs. Before remediation costs, profits in the second half of 2018 would have been $2.05 billion, slightly more than in the most recent quarter.
After Westpac led other major banks in raising interest rates in September, the bank's net interest margins were "higher", it said, excluding its treasury and markets division.
The bank said the contributions of its treasury and markets divisions were weaker, due to trading conditions. Expenses were also lower in the quarter.
It said stressed loans, as a proportion of its total book, were "little changed" over the quarter and there were no new individual loans of more than $10 million that became impaired.
Banks' earnings have been dragged down by compliance and compensation costs triggered by the royal commission in recent halves, and Westpac said there were no "material" remediation charges booked in the quarter, but additional charges were likely in the next quarter.
Costs from natural disasters have battered insurance companies recently, and Westpac said the quarter included $30 million in claims from the Sydney hail storm of December, and $35 million in claims expected from Queensland's early 2019 floods.
Westpac reports its profits on a September financial year and will deliver a half-year earnings update in May.