Westpac's profit plunges as charges for bad loans soar

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Westpac New Zealand's March quarter net profit fell 75% as charges for bad loans soared but its mortgage lending rose strongly.

Monday, June 29th 2009, 3:30PM

by Jenny Ruth

Westpac's latest general disclosure statement shows net profit for the three months fell to $45 million from $180 in the March quarter last year, bringing profit for the six months to $160 million, down 46.5% from the same six months a year earlier.

By contrast, net interest income for the latest quarter was up 24.8% to $393 million and up 16.7% to $700 million for the half year.

Impairment charges against profit jumped to $225 million in the latest quarter, bringing the charges for the six months to $316 million, up from just $61 million in the same six months a year earlier.

Impaired mortgages only accounted for $50 million of the impairment charges for the six months and other retail exposures $28 million while business loans accounted for $238 million.

Westpac's total mortgage book totalled $26.89 billion at March 31, up $365 million from December 31. Its mortgage book grew only $60 million in the December quarter. It had a further $5.21 billion of undrawn mortgages at March 31.

Using Reserve Bank figures as a proxy for the market, Westpac's share mortgages lent by registered banks rose slightly to 17.09% at March 31 from 17.03% at December 31.

Westpac's mortgages with loan-to-value ratios (LVRs) above 80% at March 31 slipped to 27.4% of its book compared with 28.2% at December 31.

NOTE: these figures are for Westpac's New Zealand subsidiary, which conducts its business and consumer banking operations in New Zealand, only. They do not include the results for its New Zealand branch, which conducts its wholesale banking and financial markets business in New Zealand. Including all Westpac's operations in New Zealand, Net profit fell 32.1% to $239 in the six months ended March.

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