Australia's Westpac sees profit rise 12 percent

SYDNEY, Australia - Westpac Banking Corp., which is aiming to become Australia's largest bank through the acquisition of a smaller rival, shrugged off the gloom of the global financial crisis and posted a healthy 12 percent rise in annual net profit.

The earnings results Thursday were a bright spot in an otherwise bleak landscape for financial institutions in Australia and globally as bad loans pile up and the credit crunch set major players reeling.

Net profit for the year ended Sept. 30 rose 11.8 percent to 3.86 billion Australian dollars ($2.59 billion) from AU$3.45 billion a year earlier, the Sydney-based bank said in a statement. Cash earnings rose 6 percent to AU$3.73 billion ($2.5 billion) from AU$3.51 billion a year ago.

Westpac, the third-largest Australian bank by market capitalization, credited strong loan and deposits grown for the rise.

Even so, Westpac's charges against profits for bad debts during the fiscal year almost doubled to AU$931 million ($604 million) from AU$482 million.

"We're particularly pleased with our revenue performance," Westpac Chief Executive Gail Kelly told a news conference.

Last week, Australia's federal treasurer approved Westpac's AU$17.3 billion takeover proposal of St. George Bank Ltd., paving the way for the formation of the country's biggest bank. The deal still requires the approval of St. George shareholders, but Westpac expects the deal to be finalized by Dec. 1.

"This is a transformational deal and will position the combined group in a very different way in the Australian landscape," Kelly said.

Westpac is the third of Australia's so-called "big-four" banks to report full year earnings in recent weeks, and the first to report good news despite the financial crisis.

Australia & New Zealand Banking Group Ltd. reported a 21 percent decline in annual profit last week as soaring charges for bad debts linked to the global credit crisis hit Australia's fourth-largest bank. Two days earlier, National Australia Bank Ltd., the country's largest by assets, reported a 1 percent drop in annual profit and sharply rising levels of bad debts. Commonwealth Bank of Australia Ltd. released its 2008 earnings in August, and reported a 7 percent net profit increase.

Australia's banking system is considered much stronger than the teetering U.S. system, with stronger regulation and only relatively small exposures to subprime mortgages in the United States and elsewhere.

But Australia's stock market has plummeted along with the rest of the world's bourses, which combined with tight credit markets has forced the government to guarantee all bank deposits and announce a multibillion-dollar spending package to prop up the economy.

Tolhurst Noall analyst George Galanopoulos said Westpac had performed well in the current economic climate.

"This was a solid result and probably the best of the big four," he said. "A successful merger with St. George would really cement their market position and strategically it makes sense."

A combined Westpac and St. George bank would have a market capitalization of about AU$53.5 billion ($35 billion) at current prices and combined assets of nearly AU$600 billion ($390 billion).

Westpac shares inched higher, closing up just 0.2 percent at AU$20.30.

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