Australia’s Westpac posts higher annual profit amid potential hindrances into 2024 By Reuters
© Reuters. A pedestrian looks at his phone as he walks past a logo for Australia’s Westpac Banking Corp located outside a branch in central Sydney, Australia, November 5, 2018. REUTERS/David Gray/file photo
(Reuters) -Australia’s Westpac Banking (NYSE:) Corp on Monday slightly missed expectations while posting a 26% rise in annual profits due to growth across its key markets, though the lender warned challenges in its operating environment would continue into fiscal 2024.
Westpac also said it had started an A$1.5 billion ($975.60 million) share buyback.
The company joins its smaller peer Macquarie Group (OTC:), which announced an A$2 billion share buyback on Friday, in wanting to return excess capital to investors, making the two Australian banks look more financially attractive.
The company said it had reaped the benefits of operational improvements and growth in its key markets, including deposits, mortgages and institutional banking.
A rapid surge in interest rates since May last year has benefited Australian lenders’ margins significantly, however, intense competition in the mortgage market, slowing credit growth and concerns over rising bad debt have emerged as headwinds.
In its update, Westpac flagged potential headwinds for its revenue in fiscal 2024, blaming the “lagged” effects of lending competition and a “modest” balance sheet growth during the year.
The company also said it expects more pressure on its cost base in fiscal 2024, as the bank foresees persistent inflation as an obstacle.
“Demand for credit (in Australia) should remain subdued with system credit growth for home lending in the 4% to 5% range and below 2% for business lending,” Westpac said, adding that many of its customers are likely to find these operating conditions challenging.
Westpac, the country’s fourth-largest lender in terms of market value, reported net profit attributable of A$7.20 billion for the year ended Sept. 30, compared with A$5.69 billion last year. That missed an LSEG estimate of A$7.41 billion.
It declared a final dividend of 72 Australian cents per share, up from 64 Australian cents a year earlier.
($1 = 1.5373 Australian dollars)
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