BankSA today announced a 3 per cent increase in net profit after tax to $119 million for the first half of its current financial year, while its parent Westpac lifted profit by 8 per cent,
The BankSA result reflected the state of the South Australian economy with ongoing consumer caution, a decline in business lending and a rush on first-home buyer loans in advance of the abolition of State Government grants.
The result was underpinned by the strong growth in deposits, gains in home lending and an improvement in impairment charges compared to the previous six months.
Deposits at BankSA jumped seven per cent to a record $11 billion.
Core earnings, which represent the underlying performance of the business before tax and the impact of impairments, increased to $181 million.
BankSA Chief Executive Nick Reade said the bank’s continued growth in deposits and home lending was a highlight.
“With low interest rates finally gaining some traction and providing support to household spending and the housing market, we’ll likely see an upward trend in home loan approvals, dwelling approvals and dwelling prices over the coming months,” Reade said.
“Unlike the rest of the country, the proportion of first-home buyers lifted to 19.7 per cent in January, the highest ratio in over four years.
“However, the rise reflects a rush ahead of the abolition of the first-home-owners’ grant for established homes, and we expect the proportion of first-home buyers will fall after this date.”
Non-residential construction continues to be supported by large, publicly funded health projects, while private investment has been lacklustre.
BankSA’s commercial lending contracted 2 per cent to $6 billion, as the broader lending market in South Australia experienced minimal growth, as businesses remain cautious and continued to strengthen their balance sheets.
Last year, BankSA began a significant refurbishment program, which will see $20 million spent over the next two years to upgrade branches across its network, delivering customers new technology, 24/7 lobbies and “smart” ATMs.
“Importantly, our investment will see a phase out of a ‘behind partition’ traditional banking environment, and replaced with more modern branch designs that will enable us to better listen to and help our customers,” Reade said.
The bank recorded a 14 per cent increase in personal loan sales.
Credit card sales also recorded a 23 per cent increase on last year, a move the banks says reflects the success of its Vertigo MasterCard, ranked by Money Magazine as “the cheapest balance transfer credit card” on the market.
Westpac lifted its first half cash profit eight per cent to $3.77 billion, with solid gains across its divisions.
The bank’s net profit for the six months to March 31 was $3.62 billion, up from $3.29 billion a year ago.
Westpac lifted its fully-franked interim dividend to 90 cents, from the previous 86 cents.
The bank lifted its revenue seven per cent to $9.79 billion for the half year.
Westpac boss Gail Kelly said each of the bank’s divisions had performed well during the half.
“I am pleased with this result and the momentum we have built across the group,” she said.
Cash earnings from Westpac’s Australian Financial services division, which includes St George, BankSA and BT Financial, lifted 12 per cent to $2.46 billion thanks to lending growth and reduced costs and impairment charges.
Earnings from Westpac’s institutional arm fell four per cent to $752 million, but the bank attributed the decline to significant one-off benefits in 2013.
Meanwhile, earnings from the New Zealand business lifted 17 per cent to $NZ432 million ($A402.18 million).
The bank’s net interest income was up four per cent to $6.68 billion, despite an eight basis point decline in margins to 2.11 per cent
Kelly said the outlook was positive for Westpac for the second half of the year.
“Our focus on tilting to growth is delivering, and this is expected to continue into the second half of the year,” she said.
She said the recent strength in the housing market and likely improvements in housing construction would lift household confidence and provide a boost for Westpac over the next few years.
“We have recently seen signs of increased customer activity and expect the economy to gradually improve throughout the remainder of 2014,” Kelly said.
She said business confidence was also improving despite the slowdown in mining investment and activity in the non-mining sector would increase during the remainder of 2014 and 15.
Make your contribution to independent news
A donation of any size to InDaily goes directly to helping our journalists uncover the facts. South Australia needs more than one voice to guide it forward, and we’d truly appreciate your contribution. Please click below to donate to InDaily.