Australia’s Westpac posts flat profit in Q3, helped by higher capital gains Reuters

(Reuters) – Australia Westpac Banking (NYSE: ) Corp said Monday that third-quarter net profit was largely in line with a year ago, as increased capital gains and covered deposits offset rising expenses and bad loans.

Based on the company’s average quarterly performance in the first half of 2024, Westpac’s unaudited net profit showed a 6% increase.

Australia’s central bank has kept policy steady since November after raising the cash rate by 425 basis points to 4.35% from May 2022 to tame inflation. The increased rate allowed Westpac to generate better returns on its own invested capital.

Higher earnings on covered deposits, where the bank has used financial instruments to hedge against interest rate fluctuations, indicate that the current interest rate environment could be working in Westpac’s favour.

However, decade-high interest rates and rising cost of living pressures are affecting households’ ability to repay loans on time, increasing financial stress on Australian banks.

“The cost of living and high interest rates remain a challenge for some customers, while many businesses face cost pressures and lower demand,” Westpac said.

Despite these macro-economic conditions, Westpac said its Australian household deposits grew by 3% on a quarterly annual basis as it managed to attract more savings from customers.

The Sydney-based lender also reported 8% growth in Australian home loans, underscoring its ability to navigate intense competition in the country’s mortgage markets.

Creditor no. The country’s No. 3 by market value said unaudited net profit was $1.8 billion ($1.20 billion) for the three months ended June 30, compared with $1.8 billion a year earlier .

The bank’s net interest margin – the difference between interest earned on loans and interest paid on deposits – stood at 1.82% compared to 1.86% a year earlier.

($1 = 1.5006 Australian dollars)