Westpac tracks lower in profits in first half of 2024, with a 16% yoy drop amid slowing economy

Westpac Banking Corporation (ASX: WBC) has maintained that it’s tracking solidly within the framework of a slowing economy and competition from other banking institutions, as it reported a 16 percent drop in net profit (to $3.342 billion) for the first half of the 2024 financial year compared to the same time last year.

There was however some growth from the second half of 2023, with net profits up 5% from that period.

Competition within the mortgage sector was evident in the drop of core net interest margin (NIM) by 9 basis points year on year compared to the first half of 2023, although this had also moderated during the six months, with a drop of three basis points from the second half of 2023.

The situation with loans was also weak, although in the green: the total number of loans rising 2% year on year, but with a lift of 5% from the second half of 2023.

CEO Peter King said that despite the headwinds, Westpac had kept its business within expectations, pleasing customers with an app rated the best in Australia, and shorter approval times for mortgage and business lending, as well as improved merchant payment services for business customers.

“This half, we’ve managed growth and margins in a disciplined way amid a slowing economy and competitive banking sector,” he said.

“Net profit after tax, excluding notable items, was down 1% for the half and 8% from the prior corresponding period.

“We grew our major Australian segments in a disciplined way with mortgages and deposits up 5% and business lending up 9% over the year.”

Commenting on the state of the Australian economy, Mr King said he knew things were tough for many people – adding that customers were increasingly contacting Westpac for assistance – but that for now, things were tracking smoothly, although this could change.

“We know Australians are doing it tough as a result of higher interest rates and the cost of living,” he said.

“Overall, the Australian economy is proving resilient. While economic growth has slowed,
unemployment remains low by historical measures.

“We believe the economy is on track for a soft landing and, if this happens, this will be good news for many Australians.”

“However, this scenario is not certain. While inflation has fallen, getting it down to target range is proving difficult globally and here in Australia. It is likely interest rates will stay higher for longer.”

He noted challenges to the global economy, in particular instability in the Middle East and Europe, but added that he believed ‘Australia is one of the better places to be’.

Westpac has been trading at $26.42