On November 5, 2018, a pedestrian in central Sydney, Australia, glances at his phone as he passes the Westpac Banking Corp. logo outside a branch.
Effort To Control Inflation
Westpac Banking Corp (WBC.AX), opens new tab, reported a decline in its first-quarter unaudited net profit compared to the previous six-months’ quarterly average, but it also stated that it sees potential for Australia’s monetary policy to become less restrictive within the next year.
The second-largest mortgage provider in Australia states that it anticipates the economy to continue to be robust due to low unemployment and strong business balance sheets.
Since May 2022, the nation’s central bank has raised interest rates by 425 basis points in an effort to control inflation, which is still significantly higher than the goal range of 2-3%.
“The economic slowdown, combined with abating inflationary pressures, should provide scope for monetary policy to become less restrictive within the next year,” Peter King, the company’s CEO, stated.
It explained the decline in earnings by pointing to the effect of noteworthy items connected to hedge accounting.
High Interest Rates
According to Brad Smoling, managing director of Smoling Stockbroking, “the massive exposure to the property sector coupled with a rapid rise in interest rates is now starting to bite.”
A reduction in nearly two years of high interest rates increased the cost of home repayments, which also hurt Westpac’s margins. This resulted in fierce competition among banks, which flattened their profit margins, combined with sticky inflation.
Source: yahoo Finance
In comparison to the second half of 2023, the lender’s core net interest margin for the three months ended December 31 was 1.80%, a decrease of 4 basis points.
“From a credit quality perspective, we saw a reduction in business stress while a rise in 90+ day mortgage delinquencies reflects the tougher economic environment,” said King.
