Australia's Westpac profit up 8% to record high

People walk past an ATM machine of Australian banking giant Westpac in the central business district of Sydney.
Saeed Khan | AFP | Getty Images
People walk past an ATM machine of Australian banking giant Westpac in the central business district of Sydney.

Australia's Westpac Banking booked a fifth straight year of record profit with an 8 percent rise in full-year cash earnings on robust loan growth and declines in bad debts.

Bolstered by a strong focus on mortgage lending, a rapidly growing property market and tight cost controls, three of Australia's "Big Four" banks have notched up five consecutive years of record income in current earnings season.

"Housing credit growth has increased over 2014 and we expect growth at similar levels to continue through 2015, driven by strong demand and continued low interest rates," Chief Executive Gail Kelly said in a statement.

Kelly said there were signs of improving prospects for non-mining investment and expected a moderate pick-up in business credit growth.

The nation's No. 2 lender by value said cash profit was A$7.6 billion ($6.64 billion), meeting the average forecast from seven analysts polled by Reuters. Revenues rose 7 percent in the year.

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Net interest income, the difference of interest earned and paid out, rose 5 percent to A$13.5 billion, while net interest margin, a key measure of profitability for a bank, fell 7 basis points to 2.08 percent.

Impairment charges fell 23 percent, it said.

Expenses at Westpac grew at 6 percent, faster than revenues, while underlying profit and revenue growth came in below expectations, Omkar Joshi, a Sydney-based investment analyst at Watermark Funds Management, said in a note.

"Overall, an in-line bottomline result, albeit a low quality result driven by lower bad debt charges and tax," he said.

The bank announced a final dividend of 92 cents a share, taking total dividend for the year to 182 cents, up 5 percent.

While economic growth and low interest rates that encourage household and corporate borrowing are expected to continue to lift bank earnings in this financial year, uncertainty over potential regulatory changes has made some investors jittery about the longer-term prospects for share price gains.

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A government-backed inquiry, tasked with providing a blueprint for the country's financial system over the next decade, is due to release recommendations later this month.

In recent weeks speculation has grown that Australia's main lenders will be required to set aside more capital as they are widely seen as too big to fail.

Westpac's shares have risen 7 percent for the year to date, outperforming a 2.9 percent gain for the benchmark S&P/ASX 200 index.