Westpac share price rises on $3.5bn first-half profit

The Westpac Banking Corp (ASX: WBC) share price is on the move on Tuesday morning.

At the time of writing, the banking giant’s shares are up almost 1% to $38.82.

This follows the release of its half-year results before the market open.

Westpac share price higher on results day

For the six months ended 31 March, Westpac reported a 2% decline in revenue over the previous half to $11.3 billion.

This reflects a 3% decline in non-interest income due to lower fee income and a decrease in Markets revenue, combined with a 1% decline in net interest income. The latter was driven by a 6-basis points decline in its net interest margin, which more than offset an increase in average interest earning assets.

Management advised that lending competition, the impact of timing differences related to interest rate changes, and weaker Treasury performance contributed to its contraction in net interest margin.

However, Westpac was able to reduce its expenses by 6% to $5.8 billion during the half, which underpinned a 4% increase in pre-provision profit to $5.5 billion.

This ultimately led to Australia’s oldest bank reporting a statutory net profit of $3.4 billion (down 5% from the previous half) and net profit excluding notable items of $3.5 billion (down 1%).

Despite the profit decline, the Westpac board elected to declare a fully franked interim dividend of 77 cents per share. This is flat on the previous half and up 1.3% on last year’s interim dividend and represents a payout ratio of 77.1%.

What happened during the half?

It was a strong half operationally. Business lending was up 13% to $120 billion and institutional lending grew 23% to $131 billion.

Elsewhere, customer deposits lifted 8% to $379 billion, business deposits climbed 5% to $156 billion, and institutional deposits grew 12% to $137 billion.

Westpac also provided an update on its Unite strategy. It revealed that of its 57 planned initiatives, it has completed 8. This includes completing the customer migration from Asgard to Panorama.

Commenting on its performance, Westpac’s CEO, Anthony Miller, said:

This half, we’ve delivered solid operating momentum while investing for the future. Our strong balance sheet and disciplined focus will allow us to support customers through global uncertainty. Westpac is well positioned to deal with the impacts of ongoing conflict. Our role is to stay close to customers, back them through current challenges and make sure help is there when it’s needed. While our customers are resilient and stress levels have declined, we’ve taken a prudent approach and increased our provisions.

Growth is solid across lending and deposits, with several highlights. We grew Australian mortgages, excluding RAMS, in the half at 1.2x system, with the proportion of new first party lending increasing. We are supporting Australian businesses with lending up across both business and institutional over the past year. At the same time we are managing costs, which are down from the prior half.

Outlook

Miller warned that the war in the Middle East is presenting challenges. He said:

The war in the Middle East is presenting challenges for some customers and the economic impact of the conflict will continue through the year. The disruption to energy supply chains has driven a rise in prices and we’re seeing this flow through to businesses and households, with some sectors more affected than others.

The post Westpac share price rises on $3.5bn first-half profit appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.