Australia’s Westpac to return $4.3 bln to shareholders as profit doubles

SYDNEY, (Reuters) – Australia’s Westpac Banking Corp (WBC.AX) on Monday said it would return A$5.7 billion ($4.2 billion) to shareholders in dividends and a buyback, as profit at the No. 3 lender more than doubled with the release of funds set aside for the pandemic.

Westpac, whose home lending volumes fell in 2020, said the rebound in the Australian economy and sky-rocketing house prices had helped drive a 4% rise in its mortgage book, but at a cost of lower margins.

Cash earnings of A$5.35 billion for the year ended September compared with the A$2.61 billion reported last year, were just shy of the consensus Refinitiv forecast of A$5.5 billion, driven by the turnaround in impairment charges.

Core profit, excluding a pre-announced A$1.3 billion hit from Westpac’s institutional bank and remediation costs, was 13% lower for the year. Cash earnings fell in the second half for all its units, including consumer, business, institutional and New Zealand.

“Our underlying results are not where we want them to be, and we recognise we have more to do to become the high-performing company we aspire to be,” said Chief Executive Peter King.

“However, we are making progress.”

Westpac’s smaller rival, Australia and New Zealand Banking Group (ANZ.AX) last week said its own mortgage book had shrunk despite a pandemic-induced boom in home lending that saw a 20% surge in nationwide home prices.

Westpac expects demand for housing to remain high and credit growth to expand to 6.8% in 2022, its highest in more than a decade. Home price growth would likely moderate to about 8%, King said, amid the country’s banking regulator tightening restrictions on home lending.

Net interest margin (NIM), a key measure of banking profitability, fell 10 basis points during the second half, to 1.99%. For the full year, the NIM was 4 basis points lower to 2.04%.

Westpac plans a A$3.5 billion off-market share buyback, and declared a 60 Australian cents final dividend, totalling A$2.2 billion.