Westpac praises NZ Government, predicts solid profit

Tuesday 2nd August 2011

Westpac New Zealand said its third quarter result due on August 16 will be a solid performance with momentum from the first-half continuing in the quarter.

Westpac New Zealand chief executive George Frazis said the result would show evidence of a slowly improving economic environment.

Westpac New Zealand's impairment charges would continue to moderate. The result would also show well managed expenses and market share growth in most products.

The Australian businessman praised the National Party-led Government and Prime Minister John Key, noting that Mr Key was an ex-banker.

"In New Zealand, we have a solid and consultative political leadership, with government and industry actually working together to address key issues," he said.

He said decision-making by the Government was decisive and responsive and the Government was much more focused on growth and credit availability than previous governments.

He said Westpac New Zealand had doubled its return on equity in the last two years from about 8 percent to close to 15 percent. This was due to an improved economic environment and to initiatives by the bank to improve its business here.

The bank had introduced a "local model" to its New Zealand business and had invested in training and technology to improve its performance.

The bank had identified a "my bank" market segment of affluent customers at 36 branches it was trying to build loyalty with. This segment of customers was three times more profitable than other customer groups.

In the past the bank had looked at transactions as a cost, but it now considered them a way of deepening the relationship with the key group of customers.

The bank has grown ahead of market in the mortgage lending in the last two years and around 55 percent of home loans were approved within an hour. About 75 percent of mortgage decisions are now made in the branch.

Interest.co.nz reported today that Westpac has increased its six month mortgage lending rate by 26 basis points to 5.85 percent and its one-year capped rate by 25 basis points to 6.75 percent.

Mr Frazis said that none of the major banks in New Zealand were trying to make their mark as a price discounter and this created a more rational credit pricing environment.

The bank expected the New Zealand economy to expand by 4.5 percent in the 2012 financial year.

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