Nov 7 (Reuters) – Australia’s third largest lender Westpac Banking Corp (WBC.AX) announced on Monday a drop in its annual profit, penalized by competition in its mortgage activity and a charge linked to the sale of its life insurance unit.
Westpac also revised its target for incurred costs to up to A$8.6 billion by financial year 2024, citing wage increases due to a tight labor market and continued regulatory costs.
The new cost target marks a departure from its target of A$8 billion by FY24 set in May 2021, part of a cost-cutting exercise that analysts had described as ” ambitious”.
However, the bank recorded a 19% reduction in its annual operating expenses, benefiting from lower asset write-downs and lower staff costs.
The bank’s full-year profit was hit by a A$1.3 billion charge in the second half, mainly due to a loss on the sale of its life insurance business. Read more
While its second-half lending margins recovered slightly from the first half, full-year margins were still down 13 basis points from a year ago. By contrast, rival Australian and New Zealand banks (ANZ.AX) recorded only a 1 basis point contraction in full-year margins. Read more
Since May, Australian banks have followed the lead of the Reserve Bank of Australia in passing on rate hikes to their customers, boosting credit spreads in the second half of the year.
Westpac’s cash profit fell 1.4% to A$5.28 billion for the year ended September, slightly beating a Morgan Stanley estimate of A$5.23 billion.
Westpac declared a final dividend of 64 Australian cents per share, up from 60 Australian cents last year.
($1 = 1.5610 Australian dollars)
Reporting by Harshita Swaminathan and Savyata Mishra in Bengaluru; edited by David Evans and Deepa Babington
Our standards: The Thomson Reuters Trust Principles.