Westpac’s December quarter cash earnings have exceeded expectations, according to Citi analyst Thomas Strong. The bank reported $1.9 billion in cash earnings, 5 per cent higher than anticipated. This beat was primarily driven by stronger treasury revenue and a reduction in bad debts. However, the core net interest margin experienced a slight dip of 1 basis point, which was offset by increased average interest-earning assets. Westpac is one of Australia’s largest banking and financial services institutions, providing a range of products and services to individuals, businesses, and institutions. It operates several brands, including Westpac, St.George, BankSA, and RAMS.
Strong noted that Westpac’s loan growth, amounting to approximately $10 billion, outstripped its deposit growth. This is in contrast to its peers, meaning Westpac did not benefit from the same portfolio mix lift in margins. The bank demonstrated effective cost management, maintaining expenses at $3 billion. The CET1 capital ratio of 12.3 per cent aligned with expectations.
“Overall, a solid result,” Strong commented. He noted that while the net interest margin story differed slightly from its competitors, the stronger 2.7 per cent quarterly growth compared favourably to the 1 to 2 per cent seen among peers. Strong anticipates that the well-managed costs, benign asset quality, and strong capital position will lead to a positive reception of the results. However, he expects minimal impact on consensus earnings estimates.
Despite the positive earnings surprise, Westpac shares were down by 1.6 per cent in recent trading.
