Westpac Group's earnings edge up 7%

Strong gains from Australia and New Zealand.

According to an SGX release, cash earnings in Second Half 2012 of $3,403 million were up $208 million over First Half 2011, a rise of 7%. Both Cash Earnings and core earnings were up strongly across Australian Financial Services and New Zealand, with a particularly strong result from St.George and BTFG.

Net interest income was 2% higher over the prior half with a 1% rise in average interest-earning assets and a 1 basis point rise in margins. Treasury income was also up strongly in the half, while WIB was lower and the costs of holding increased levels of liquid assets and hybrids were higher.

Lending increased 2% with Australian mortgages continuing to be the main source of growth. Customer deposits rose $28 billion, materially higher than the $8 billion rise in lending, boosting the deposit to loan ratio by over 4 percentage points to 67.6%.

The rise in margins was principally due to the full period impact of pricing changes implemented in First Half 2012 partially offset by increased costs of retail deposits relative to market rates.

Non-interest income was particularly strong over the prior half with a significant uplift in wealth and insurance earnings and higher trading income. Expenses rose 2% over the half with the impact of productivity savings assisting to offset increased investment costs (particularly depreciation and amortisation), and higher compliance
spending.

Impairment charges were $4 million lower with reductions recorded in Westpac RBB, St.George, New Zealand and WIB partially offsetting an $18 million increase in the economic overlay.

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