Westpac Banking has reported a 62% drop in its statutory net profit for the first half 2020 (1H20) that ended 31 March to AUD1.19bn ($770m), compared to AUD3.17bn ($2.04bn) made in the same six months of the previous year.
In the second half of 2019, the Australian banking group made a net profit of AUD3.61bn.
The earnings per ordinary share for 1H20 came down by 64% to 33.2c from 92.3c reported in 1H19.
The bank’s 1H20 performance was affected by impairment charges of AUD2.23bn compared to AUD333m it reported in the same period in the previous year.
The significant increase in impairment charges in the reported period was because of the expected economic effect of the Covid-19 outbreak, costs pertaining to the AUSTRAC proceedings, which includes a provision for a potential penalty, and the impact of estimated customer refunds, payments, related costs and litigation, which together brought down the net profit before tax by nearly AUD3bn.
Westpac’s net interest income for 1H20 was up by 9% to AUD9bn from the AUD8.26bn reported in 1H19. Its operating expenses in the reported period were up by 21% to AUD6.18bn compared to AUD5.09bn in 1H19.
The bank’s consumer banking business saw a 14% drop in its 1H20 cash earnings at AUD1.41bn compared to 1H19. The business banking unit reported cash earnings of AUD604m, which is 51% lower than what was announced in 1H19.
The Westpac Institutional Bank and Westpac New Zealand reported cash earnings of AUD175m and NZD295m for 1H20, respectively, which are down by 68% and 47% compared to 1H19.
The Australian bank’s board has decided to defer the decision on determining an interim dividend and the bank will not pay any dividend to its shareholders in June 2020.
Westpac Group CEO comments on first half 2020 results
Westpac Group CEO Peter King said: “This is the most difficult result Westpac has seen in many years. It is significantly impacted by higher impairment charges due to COVID-19, as well as notable items including the AUSTRAC provision.
“Westpac’s balance sheet remains strong. Customer deposits were up $19 billion over the half, more than funding loan growth which increased by $5 billion. The deposit to loan ratio is now over 75 per cent.
“We are well capitalised and our liquidity and funding metrics are comfortably above regulatory requirements.”
