Westpac has reported a 256 per cent increase in cash earnings to $3.53 billion and a 189 per cent increase in net profit to $3.44 billion for the first half to March 31 this year.
As a result, the bank said it would be awarding an interim dividend of 58 cents per share, up from the 31 cents per share investors got last year.
Westpac CEO Peter King said it had been a promising start to the year with increased cash earnings and significant growth in mortgages.
The result has been wholly positive for the bank. Here’s a breakdown of the results.
Westpac said it has worked hard to reduce risk within the bank following the Banking Royal Commission as well as the more recent AUSTRAC investigation which saw the bank pay $1.3 billion for 23 million breaches of anti-money laundering laws.
“Strengthening risk governance across financial and non-financial risk is one of my top priorities, and we have a comprehensive plan underway,” King said.
“We have more than doubled the number of people in our financial crime operations team over the past 18-months ad added more than 100 roles in risk to improve our risk management capability.”
King said the bank is focused on completing customer remediation as soon as possible, having already paid $200 million to around 500,000 customers over the half.
Further branch closures to come
King said there has been a focus on simplifying the business, flagging that a lot of the bank’s processes have been moved into the digital space.
“We continue to simplify how we operate to be more responsive to our customers’ needs. Our end-to-end digital mortgage platform is now in place and has completed more than 20,000 settlements,” King said.
Westpac’s CFO Michael Rowland said the bank is trying to reduce costs from $10 billion in 2020 to $8 billion by 2024 and that will in part be done through branch closures.
“Over time, the further simplification will mean that we'll have less branches, (but) we'll have different ones,” Rowland said.
“But that will mainly be in the metro areas where we are being more responsive to what our customers want. And we will have a smaller head office over time as we're a much simpler, smaller bank.”
Mortgage business boosted
Westpac has benefitted from soaring property prices in both regional and metropolitan Australia.
The bank's mortgage book increased by $2.6 billion over the last six months, with first home buyers making up 13 per cent of new loans.
“Our performance over the past six months has improved, particularly in mortgages,” King said.
“Under our mortgage Line of Business, we have returned to growth through end-to-end management of the mortgage process. Getting the process right for customers and being more competitive has delivered benefits.”
A cleaner investment approach?
Interestingly, Westpac also made moves to be more climate conscious, committing the bank to exclude any new oil and gas customers that don’t have publicly disclosed Paris-aligned business goals.
The bank said after completing an initial study of how global oil and gas demand might perform when carbon emissions are constrained in line with the Paris agreement, it decided to update its approach.
However, Australian campaigns coordinator at Market Forces Jack Bertolus said there are still significant gaps in the approach that allow Westpac to continue to fund existing customers with no Paris-aligned business plans.
“While still far from aligned with the Paris Agreement, Westpac’s announcement today signals the beginning of the next wave of bank exclusion and divestment from fossil fuels, this time targeting polluting oil and gas,” Bertolus said.
“Disappointingly, Westpac hasn’t applied the same standard to its existing oil and gas customers, many of which continue to expand the sector, including Santos and Woodside.”