Australia’s Westpac Bank Reports $1.8 Billion Profit Amid Cost of Living Pressures

Major Australian bank Westpac has reported a strong profit while acknowledging cost of living and inflationary pressures.

Westpac delivered a net profit after tax of $1.8 billion (US$1.2 billion), 6 percent higher than the first half of the 2024 quarterly average (pdf).

The bank’s net interest income (NIM) increased 1.92 percent to $4.7 billion, a measure of its lending performance.

Banks make money on the interest when they lend out money for loans, and pay out interest to those who deposit funds with the bank. The net interest margin is the difference in these figures.

Westpac also reported positive operating momentum, with a $15.4 billion boost in customer deposits and $14.7 billion in loan growth.

Westpac said this included 3 percent growth in Australian household deposits, and 8 percent in housing loans.

The bank also reported a 1 percent rise in net operating income to $5.4 billion, while operating expenses rose 2 percent to $2.7 billion.

Expenses rose due to “higher investment spend” and ongoing inflationary pressures, especially in technology services.

Westpac noted higher net interest margin and loan growth. However, non-interest income fell 4 percent due to lower financial markets revenue.

The market appeared to react positively to the results, with Westpac shares up 2.11 percent as of 4:30 p.m. By comparison, the ASX200 index of Australia’s top 200 companies rose only 0.18 percent.

Westpac CEO Peter King said the bank’s consistent focus on customer service had contributed to another solid quarter.

“We grew the business and maintained a strong financial position. We continue to prioritise financial strength with capital, funding and liquidity well above regulatory minimums.”

King also highlighted the impact of the cost of living.

“The cost of living and high interest rates remain a challenge for some customers while many businesses are facing cost pressures and experiencing lower demand. We encourage customers to call us if they need help.”

A Snapshot of Australian Mortgages

According to an investor presentation the bank released together with the results, Westpac’s Australian mortgage portfolio was $504.2 billion at the end of June 2024.

Out of these, 67.7 percent of mortgages were owner-occupied (pdf), while 12 percent were interest-only.

Westpac mortgage figures also showed that 89 percent of mortgages were on variable rates, while 11 percent were fixed.

The results showed that mortgage delinquencies of greater than 90 days rose by six basis points in Australia to 1.12 percent. This means that about 1 in 100 Australian mortgages were 90 days or more behind on their payments.

Westpac made a point of highlighting the work they were doing on digital verification and detection of scams.

King was especially pleased with the bank’s efforts to improve the customer experience and to “keep customers safe.”

This included a new online ID verification process, better detection of payment scams, and mobile notifications to alert customers of bonus interest opportunities.

This comes after Financial Minister Stephen Jones called on banks to fight scammers with systems to identify dodgy payments.

“We will require the banks to strengthen controls around bank transfers. This will attack the most common payment method for scams head-on,” he said at the National Press Club on July 31.

“This will attack the most common payment method for scams head-on.”

How Did the Other Banks Perform

Meanwhile, National Australia Bank (NAB) reported a $1.9 billion statutory net profit to the market on Aug 16.

In a third-quarter trading update (pdf), the bank said underlying profit had fallen 2 percent compared to the first half of the 2024 quarterly average. Revenue also fell 1 percent, while the net interest margin was stable.

NAB CEO Andrew Irvine also noted the economic environment, including inflationary pressures.

“While most customers are proving resilient, not unexpectedly, we have seen asset quality deteriorate further in 3Q24. It is essential we keep our customers and our bank safe,” he said.

Meanwhile, the Commonwealth Bank of Australia (CBA) delivered its full financial year 2024 results on Aug. 14, reporting a $9.48 billion profit after tax.

The bank reported that the Australian economy remained resilient with low employment, continued private and public investment, and exports that helped the national income.

However, the bank said higher interest rates were gradually moderating inflation and putting the brakes on the economy

CBA’s statutory net profit after tax fell 6 percent compared to the 2023 financial year. The bank also acknowledged Australians continue to face challenges in the cost of living and a fall in real household disposable income.

“With slower economic growth and moderating demand, our strong balance sheet allows us to continue to support our customers and the broader economy and deliver sustainable returns,” the bank said (pdf).

ANZ is expected to deliver its June quarter results on Aug. 20.