Interest charge

Australian lender Westpac sees profits fall and raises cost target

Nov 7 (Reuters) – Australia’s No.3 lender Westpac Banking Corp (WBC.AX) reported a drop in annual revenue on Monday, hit by a charge over the sale of its life insurance unit, and raised its cost forecasts as it collapsed. prices and higher unemployment until 2023.

Westpac has revised its target for incurred costs to A$8.6 billion ($5.52 billion) by FY2024 from a previous target of A$8 billion, citing wage increases due to a tight labor market and ongoing regulatory costs.

Westpac’s cost target excludes its specialty business and certain other items. Citi analysts said that implied a total cost base of A$9.2 billion for the 2024 financial year, which consensus estimates have already factored in.

“This provides a clear point of differentiation from recent peer results, where revenue increases were muted by cost revisions,” Citi analysts said.

Shares in the lender fell more than 3% to A$23.38, while the broader market (.AXJO) rose 0.5%.

However, Westpac saw a 19% reduction in annual operating expenses in its 2022 financial year, benefiting from lower asset write-downs and personnel costs.

The bank’s cash profits fell 1.4% to A$5.28 billion for the year ended September 30, slightly beating a Morgan Stanley estimate of A$5.23 billion. It declared a final dividend of 64 Australian cents per share.

The result met most analysts’ forecasts, but shows that Australian banks are on the brink: as they start to benefit from higher interest rates, which widen their profit margins, they are preparing to a slowdown in their core mortgage lending business.

While Westpac’s lending margins in the second half recovered slightly from the first half on the back of higher interest rates, full-year margins were still down 13 basis points from compared to last year.

In contrast, its smaller rival, Australia and New Zealand Banking Group (ANZ), saw only a 1 basis point contraction in margins for the year as a whole.

($1 = 1.5571 Australian dollars)

Reporting by Harshita Swaminathan and Savyata Mishra in Bengaluru; edited by David Evans, Deepa Babington and Paul Simao

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