Westpac profit holds up, almost

Westpac Banking Corporation has managed to weather the global financial crisis in reasonable shape, reporting just a 1 per cent decline in net profit to $2.1 billion for the six months ended March 31, albeit that cash earnings were down 6 per cent.

The result will see the banking group reduce its dividend as part of what it describes as efforts to conservatively manage its capital. It will pay a fully franked interim dividend of 56 cents, down 20 per cent on the prior corresponding period.

Importantly, however, the banking group reported that BT Financial Group, which now incorporates St George’s wealth business, had reported a fall in cash earnings of 17 per cent.

It said the result had been impacted by lower fees from funds under management and fund administration related to weaker business.

The BT analysis said that the funds business had seen net positive flows of $0.6 billion and, like other wealth management operators, it had seen improved sales within its insurance business.

Commenting on the result, Westpac chief executive Gail Kelly said she believed the banking group had performed soundly in a very challenging operating environment.

Looking to the future, she said that while it appeared some of the severe stresses of the financial crisis had now stabilised, the more dominant impact on Westpac would be the size and duration of the recession in its home economies of Australia and New Zealand.

Kelly said while larger impairments associated with the impacts of the global financial crisis appeared largely behind the bank, it was seeing more pressure across its business customers and expected consumer stress to grow as unemployment rose.

She said that, as a result, Westpac expected impairment charges to remain at a high level throughout the second half of this year and into 2010.