Westpac NZ: Solid, sustainable and positioned for growth

Media Release
3rd May 2013

Westpac NZ: Solid, sustainable and well positioned for growth

Westpac New Zealand* has produced a 7% rise in cash earnings to $370 million for the first half of FY13 against the same period last year.

Cash earnings** were supported by solid core earnings growth of 1% to $582 million, and a 32% reduction in impairment charges. Chief Executive Officer, Peter Clare, said it was a solid performance in a subdued and highly competitive environment.

Net interest margin (NIM) was down 33bps principally due to the inclusion of treasury assets*** in Westpac New Zealand results. Excluding these assets, NIM declined 7bps and was affected by reduced deposit and lending spreads from strong competition.

“Our focus has been on continuing to build a strong and sustainable business and we are well positioned to help New Zealanders as the economy improves and confidence returns,” Mr Clare said.

“Improving the strength of the balance sheet has been a particular focus and we are well funded. We have taken a disciplined approach to new lending with a focus on asset quality.”

“Over the half, we invested in our brand and new technology to ensure we are available in the channels customers prefer. Technology and digital channels will continue to be an area of investment.”

“We have a strategy that is right for the times,” Mr Clare said. “I am pleased with our consistent approach to its execution and our focus on quality customer relationships.”

Westpac New Zealand strengthened its deposit to loan ratio from 67.7% to 75.1%. Total deposits grew 14% to $45 billion. Term deposits grew 16% or $3.4billion while other deposits increased 12% or $2.2 billion, mostly in call, online and business savings. Deposit growth more than funded loan growth further reducing reliance on international wholesale funding.

Total lending increased 3% to $59.9 billion. Home lending grew 3% to $36.4 billion. There was a targeted reduction in higher LVR home lending resulting in good quality growth in the lower than 80% LVR category. Overall Business lending was consistent with low system growth, but performed well in target segments, particularly Agri which saw 8% growth, well ahead of system growth of 5%.

The continued success of My Bank strategy has led to improved cross sell resulting in a 28% increase in funds under management and an18% rise in wealth income. There was also a 3% lift in customers with four or more products as Westpac New Zealand continues to deepen relationships with customers. A personalised digital marketing programme tailored to customer needs and life stages has contributed to this.

Customers continue to adopt digital technology with the number of online banking customers increasing by 5%, mobile banking customers increasing over 12 times and
electronic deposits via Smart ATM’s increasing over five times.

Westpac New Zealand is the first, and only, New Zealand bank to launch a dedicated iPad banking app. More innovative mobile apps are planned for the second half of the year. Digital, self help technology is also a key component of the new flagship branch launched in Auckland’s Queen St while a new branch format is being trialled at Silverdale, north of Auckland.

Investment in digital channels and next generation distribution in response to new and evolving customer needs and behaviours is one of Westpac New Zealand’s five strategic imperatives. The four other strategic imperatives are:
• Build a faster moving, more responsive and flexible business
• Deepen customer relationships
• Continue to simplify processes to make it easier and faster for customers
• Continue to strengthen the balance sheet

* Westpac New Zealand is a management divisional view only, and is not the same as Westpac New Zealand Limited. The financial results of Westpac New Zealand Limited will be available in the Disclosure Statement.

** Cash earnings are net operating income less deductions for operating expenses, impairment charges and tax and non-controlling interests. For Westpac New Zealand division, the reported Cash earnings are the same as the statutory profit as reported in the Westpac Group Interim Results announcement for the six months ended 31 March 2013.

*** The inclusion of these assets has resulted in a 26bps reduction in margins as these assets substantially increased interest earning assets but made little contribution to net interest income.

Ends

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