Westpac Banking Corporation beat forecasts with a 9 percent rise in second-half profit, helped by strong fund management performance, and said business momentum was strong this year.
Westpac, Australia's best performing major banking stock in 2007, did not give a specific profit outlook for the current year but said it was confident of delivering solid growth in a robust domestic economy, while demand for credit was expected to remain high.
Westpac said it had no exposure to the distressed U.S. subprime mortage market, but added that funding costs had risen due to a global credit market squeeze which could possibly have some short-term impact on the bank. As a precaution, Westpac made A$28 million in additional provisions to reflect global market volatility.
The bank also seized an opportunity that arose from the global turmoil, buying the brand and distribution business of battered non-bank lender RAMS Home Loans Group Ltd last month as the credit troubles choked off RAMS's funding.
"We are very excited about the RAMS acquisition and we believe that the distribution assets are of real strategic interest and gives us additional distribution fire power. That deal is proceeding very well," - Westpac's outgoing Chief Executive Officer David Morgan told reporters.
Westpac shares were up 2 percent at A$31.16 by 0412 GMT, after hitting an all-time high of A$31.31 earlier in the day. Westpac, Australia's oldest bank, reported a cash profit of A$1.829 billion ($1.7 billion) for April-September, up from A$1.678 billion from a year ago. Six analysts on average had projected profit of A$1.778 billion. Full-year cash profit rose 14 percent to a record A$3.507 billion as revenue grew 11 percent.
Cash earnings, effectively the core profit, exclude one-off items and non-cash accounting items, and form the basis for dividends payable to shareholders.
Australian banks are benefiting from 16 straight years of economic growth while three-decade low unemployment has kept bad debt in check, but increased competition from non-bank lenders and foreign banks such as ING and HBOS Plc is increasing costs.
Westpac announced in August that Gail Kelly, former chief executive of St George Bank Ltd, would replace Morgan, who has been at the helm since March 1999. Westpac's wealth management division, BT Financial Group, was its strongest performer, with a 23 percent rise in cash earnings for the full year.
[132] 01.11.2007 Source: Reuters
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Westpac said it had no exposure to the distressed U.S. subprime mortage market, but added that funding costs had risen due to a global credit market squeeze which could possibly have some short-term impact on the bank. As a precaution, Westpac made A$28 million in additional provisions to reflect global market volatility.