Westpac Bank interim profit up in volatile environment

Westpac Bank interim profit up in volatile environment

SYDNEY - Australian banking heavyweight Westpac posted a 3% rise in interim net profit Monday despite a volatile environment at a time of regulatory changes and bad debt fears.

Australian banking heavyweight Westpac posts a three percent rise in interim net profit on May 2, 2016 despite a volatile environment at a time of regulatory changes and bad debt fears

Westpac's A$3.70 billion (US$2.81 billion) result in the six months to March 31 kicked off a week of half-yearly reporting from the nation's top lenders, which all face similar concerns.

It comes as slumping commodity prices squeeze Australia's resources companies, causing worries for banks that have lent them billions of dollars.

The banks are also juggling new rules by the Australian Prudential Regulation Authority that demand they hold more reserves as a buffer against mortgages -- part of a global effort after the 2008-9 financial crisis.

Westpac's cash profit, the industry's preferred measure which strips out volatile items, was A$3.90 billion, slightly below expectations.

Chief executive Brian Hartzer said the result was sound, given the environment.

"Westpac remains well-placed to respond to this challenging environment," he said.

"We have strengthened our balance sheet and made good progress implementing our strategy to build one of the world’s great service companies by investing in growth, service, and productivity initiatives."

In response to the regulatory changes, the bank raised around A$6 billion in equity over calendar 2015 which Hartzer said had "materially strengthened the group’s capital base", but impacted earnings per share.

"Importantly, on most measures, overall asset quality remains sound, with the level of stressed assets little changed over the half," he added.

"There have been a few pockets of stress, mostly related to lower commodity prices, and an increase in provisions for a small number of larger exposures, which contributed to a rise in impairment charges."

Impairment expenses of A$667 million were noted for the first half, almost double last year’s level.

Despite rising bank funding costs and tougher capital rules, Westpac managed to raise its dividend by one cent to 94 cents per share.

ANZ Bank reports its interim profit on Tuesday while National Australia Bank follows on Thursday.

The Commonwealth Bank, the country's biggest lender, follows a different cycle, and posted a modest two percent rise in first-half net profit to A$4.62 billion in February.

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