In a snapshot:
Statutory net profit up 1 per cent at $8.095 billion
Cash earnings little changed at $8.065 billion (compared to $8.062 billion last year)
Cash earnings down 1 per cent at 236.2 cents
Fully franked dividends unchanged at 94 cents per share
Westpac has reported flat cash earnings growth of $8.065 billion, falling below expectations.
The CEO of the nation’s second-largest lender Brian Hartzer attributed the “flat financial result” to a “difficult year” that saw funds go to compliance and regulation.
“While the economic environment remains supportive, this result reflects the tough operating conditions for banks, with higher regulatory, compliance and funding costs, and increased competitive pressure, particularly in the second half.”
Customer remediation and legal costs had cost the major bank $281 million after tax, the equivalent of 3.5 per cent of cash earnings, he added.
Westpac still picking up the pieces post-Royal Commission
Hartzer said the bank “remain[s] committed to getting things right for our customers” and was implementing the Australian Banking Association’s Six Point Plan.
“We have reinforced our values and service culture to all employees through additional training, introduced the Sedgwick remuneration recommendations for employees two years earlier than required, removed grandfathered commission payments for our salaried financial advisers, and launched a simpler and more transparent pricing structure for BT’s investment platform, Panorama,” the bank CEO said.
Australian economic outlook
The outlook for the Australian economy is positive, but headwinds are likely in 2019. GDP will moderate at 2.7 per cent, according to Hartzer.
“Employment growth is expected to remain solid, with continuing above-trend investment in private and public infrastructure,” he said.
“However, household income growth remains subdued and inflation is low.”
Westpac predicts the Reserve Bank of Australia will continue holding its cash rate at 1.5 per cent through all of 2019.
“We expect house prices to cool further, and investor demand to remain weak. On the other hand, demand from first home buyers is holding up.
“These dynamics are likely to lead to housing credit growth easing to 4 per cent next year, with total credit growth of 3.5 per cent.”
Credit risks in the housing market remain low, with 70 per cent of Australians ahead on their repayments, Hartzer added.
“While we have more work to do, we are dealing decisively with known issues,” he said.
The bank has lifted its 2019 productivity target to $400 million and will look to further invest in technology and digitise its businesses.
“We are committed to supporting our customers over the long term, and believe our service-led strategy remains the best way to create value for our shareholders.”
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