May 5 (Reuters) – Westpac Banking Corp reported lower-than-expected first-half profit on Tuesday and warned that Middle East conflict was pressuring customers through higher energy prices.
Australia’s second-largest mortgage lender reported a first-half net profit attributable of A$3.41 billion ($2.44 billion), missing the Visible Alpha consensus of A$3.47 billion, hurt by higher credit impairment charges and weaker Treasury income.
The bank recorded a credit impairment charge of A$443 million, up from A$250 million a year ago, citing a more cautious economic outlook, new portfolio overlays and an increase in newly impaired loans.
Chief Executive Anthony Miller said the bank remained well positioned to deal with the impact of the Middle East conflict, but while stress levels had declined, the bank had taken a “prudent approach” to increase its provisions.
“The war in the Middle East is presenting challenges for some customers and the economic impact of the conflict will continue through the year,” the bank said.
“The disruption to energy supply chains has driven a rise in prices and we’re seeing this flow through to businesses and households.”
Despite that, the bank’s overall credit quality remained stable: the share of stressed loans fell to 1.16% of total exposures, down 20 basis points (bps) from last year, while delayed mortgage payments for over 90 days fell 19 bps to 0.64%.
Australian housing loans, excluding Westpac’s RAMS portfolio, grew 7% during the first-half, while business lending grew a sharp 16%, driven by the property, infrastructure and industrial sectors.
Westpac’s net interest margin, a key measure of profitability, slipped three basis points to 1.89% from 1.92% a year earlier, hurt by lending competition, higher credit impairment charges and lower Treasury income.
Its common equity tier 1 (CET1) ratio, a key measure of spare cash, stood at 12.42% at the end of the first-half, compared with 12.24% a year earlier.
The lender declared an interim dividend of 77 Australian cents per share, higher than the 76 Australian cents declared a year earlier.
($1 = 1.3951 Australian dollars)
(Reporting by Shivangi Lahiri & Rajasik Mukherjee in Bengaluru; Editing by Tasim Zahid)
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