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Westpac's first quarter cash earnings were about $1.6 billion, with Australia's second biggest lender says the performance is a clear sign of an improved environment - reports news.com.au
Chief executive Gail Kelly said in a statement today the earnings was a result of reduced impairments and good momentum across all businesses.
"Although we remain cautious on the economic outlook, we believe that the worst of the crisis is now behind us and this is reflected in the significant fall in impairment charges," Mrs Kelly said.
"Consumer asset quality remains strong although we expect a small increase in delinquencies throughout the year."
Westpac said customer margins declined by five basis points in the first quarter, driven by an increase in the average cost of funds.
Fee income was also lower after the bank reduced exception fees, in response to National Australia Bank Ltd which abolished its exception fees.
The merger with St George was progressing well with above system growth in lending and deposits.
Westpac raised $21 billion of term funding during the first quarter, with the average term of the issuance increasing to 4.8 years.
Average funding costs were continuing to rise because of the longer funding profile.
Westpac said there were still uncertainties and risks in the global environment, even as the local economy continued to improve.
"Our strong capital position, together with the steps we have taken to manage our funding, will facilitate our continued support of our customers as the economy recovers," Mrs Kelly said.
The bank's Tier 1 capital ratio was at 8.5 per cent at December 30, up 38 basis points from September.
Westpac said it continued to outperform the system in mortgages and household deposits.
Its mortgage growth was 1.8 times system growth during the three months to December, compared to the 1.5 times over fiscal 2009.
Westpac increased household deposits at 1.5 times system growth, compared with 1.1 times during fiscal 2009.
The bank's lending had grown 1.7 per cent since September 2009 driven by the growth in mortgages.
Westpac's impairment charge during the first quarter was about $400 million, having declined from earlier quarters.
Westpac said it was unlikely to maintain treasury and markets revenue at the elevated levels of the first quarter.
The bank said its total stressed lending exposure had stabilised at just under three per cent of total committed exposures and it was now focused on working through existing stressed facilities.
New stressed assets were now smaller, fewer and spread across industries and geographies.
Westpac added that the outlook for commercial property was improving, with valuations stabilised and investor sentiment improving, as the bank worked through its lending book.
But the bank also said that the level of stressed assets in commercial property was likely to remain high.
Consumer borrowers were performing well so far, although the bank expects delinquencies to rise.
