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Australia's Westpac: No Major Writedowns to Come

Reuters
Thursday, 7 Aug 2008 | 8:51 PM ET

Westpac Banking, Australia's fourth-largest lender, assured investors on Friday it would avoid the major writedowns taken by some of its rivals and was on track to deliver 6-8 percent cash earnings growth in 2008.

David Zalubowski

The bank also said it was well positioned to complete its proposed A$17.2 billion ($15.6 billion) takeover of St. George Bank, which would be the country biggest bank merger.

"Westpac's conservative risk profile has meant it is not at risk from the types of significant writedowns in securities portfolios that have impacted some other financial institutions," the bank said in a statement.

Last month, National Australia Bank (NAB), the nation's top lender, booked another A$830 million ($751.2 million) in losses from its exposure to U.S. mortgages, blaming the worsening global credit squeeze for the higher provisions.

Three days later, Australia and New Zealand Banking Group (ANZ) warned its profits would fall sharply and forecast more than $1 billion in bad debt charges as the global credit crisis started to hurt the country's previously buoyant banks.

Westpac added that its stressed loans had increased and it expected higher collective provisions in the second half as a result of growth in lending. But it added: "Total impaired loans are at similar levels to the first half of 2008."

Revenue growth was expected to be between 8-9 percent in 2008, while underlying margins in the second half were seen broadly in line with the first half.

Westpac also said its term funding in fiscal 2009 was likely to be lower at between A$20 billion and A$25 billion, from A$32 billion in 2008. The merger with St. George was expected to add $10 billion to term funding.