Shares in Westpac jumped more than 6 per cent today after a one-third increase in the bank's first quarter cash earnings underscored its strength as one of the nation’s biggest lenders.
Cash earnings on an unaudited basis were about $1.6 billion for the three months to December 31, up from $1.2 billion in the same period a year before.
Cash earnings were $1.23 billion for the fourth quarter of the bank’s fiscal 2009, which ended on September 30 last year.
Sydney-based Westpac also said today that it had increased market share.
Although pleasing for shareholders, the earnings figure fuelled criticism that the major banks and their shareholders were enriching themselves at the expense of consumers during a downturn.
Westpac chief executive Gail Kelly said the improved earnings were a result of a halving in impairment costs and good momentum across all businesses.
‘‘Our strategy for the whole of the crisis has been to remain open for business,’’ Mrs Kelly said. ‘‘Across our group, we’ve seen growth in market share, in superannuation, in retail deposits, in home lending, in the SME (small to medium enterprise) sector.’’
The bank’s deposit growth was 1.5 times system growth during the three months to December 31, reinforcing its position as the country’s second biggest deposit holder.
Loan lending grew 1.8 times system growth.
Westpac, together with the country’s biggest lender, Commonwealth Bank, used its scale at a time of lessened competition to grab market share in home loan lending and deposits.
Westpac shares rose $1.44, or 6.2 per cent, to close at $24.74, the highest since January 26.
Westpac’s gain helped the benchmark S&P/ASX 200 index rise one per cent.
Tyndall Investment Management analyst Brad Potter said the Westpac result was a good update.
‘‘On the face of it, there will be at least 5 per cent upgrades on 2010 earnings, and the market’s reacting to that,’’ he said.
Mr Potter said Westpac’s bad debt figure probably meant that estimates for the normalisation of the bad debt cycle could be brought forward by six months.
He said first quarter reports from National Australia Bank on Friday and ANZ Ban on February 26 would clarify the situation.
Westpac’s impairment charge during its first quarter was about $400 million, halving from about $800 million in preceding quarters.
However, Westpac chief financial officer Phil Coffee said bad debts had fallen faster than expected and he cautioned against basing a full-year estimate on that.
The bank said its total stressed lending exposure had stabilised at just under three per cent of total lending and it was now focused on working through existing stressed facilities.
Mr Potter said it was difficult to increase estimates for Westpac earnings beyond this year based on the latest update.
‘‘I’d be hesitant to be extrapolating any upgrade in the outer years,’’ he said.
Westpac raised $21 billion of term funding during the first quarter, with the average term of the issuance increasing to 4.8 years, as the bank sought to fund its lending.
Average funding costs were continuing to rise because of the longer funding profile, Westpac said.
It also warned there were still uncertainties and risks in the global environment, highlighted by Greece’s debt problems.
Abacus Australian Mutuals, which represents credit unions and building societies, said the Westpac and CBA results showed that the claim the banks were being hurt by higher funding costs was false.
‘‘A strong retail banking system is a good thing for Australia, but these sorts of profits are a slap in the face to hard-working Australians,’’ Abacus chief executive Louse Petschler said in a statement.
University of New South Wales associate professor Frank Zumbo said the higher bank profits showed consumers were paying more interest than they should because of the dominance of the major lenders.
‘‘The four major banks have been able to continue pushing up interest margins on loans because of the dramatic fall in banking competition,’’ he said.
Westpac’s strong performance was expected after CBA reported earlier this month that its first-half cash profit surged 54 per cent on lower bad debts and strong lending and deposit volumes.
AAP
