Westpac has joined its other big rivals in reporting a record profit for its latest financial year, with cash earnings rising to $6.301 billion.

As large as the profit numbers are, though, investors may not be satisfied; the result was a touch short of market forecasts.

But analysts dismissed that slight miss and the poor market reaction which saw the bank's shares lose 2.5% or 55c to $21.39, thanks to the latest round of fears about Greece and the eurozone.

The cash result was up 7% (the NAB's was up 19% on a cash earnings basis to a record $5.5 billion and the CBA saw a 12% rise to a record $6.8 billion).

All in all the trio earned more than $18.6 billion in the 2011 financial year.

The ANZ is expected to reveal earnings of more than $5 billion later today.

Westpac said it had declared a record fully franked final dividend of 80c per share, up 4c, or 5% over First Half of 2011.

Total dividends for the year were 156c, up 12% over the prior year, and represented a pay-out ratio of 75%.

Westpac Group CEO, Gail Kelly said in the statement that: "It is pleasing to see evidence of our strategy delivering tangible benefits.

"Deeper customer relationships, measured by customers with four or more products, are a real strength at a time of more subdued economic growth. We are also growing overall customer numbers in each of our major brands.

"In addition, our customer experience is continuing to improve, aided by our investment in people, in technology and in simplified processes.

"We have continued to strengthen our balance sheet over the year. Our capital ratios are at the upper end of the banking sector globally and our funding position is materially enhanced, supported by customer deposit growth exceeding lending growth by $11 billion over the year. Our credit quality is better than that of our Australian peers."

Speaking about current economic conditions, Mrs. Kelly said," The global operating environment is clearly evidencing weakness with sovereign debt issues across the Euro zone and weak growth in the US. International events have weighed heavily on consumer and business confidence in Australia and are contributing to a softer outlook."

Mrs. Kelly added, "We are seeing our customers respond appropriately to increased uncertainty by increasing debt repayments and by saving more.

"This supported an 11% increase in our customer deposits," she added.

"Australia's economic fundamentals remain sound with solid employment, well controlled inflation, a robust mining sector and the benefit of proximity to Asia.

"While Australia is better positioned than most other developed nations, the current consumer and business caution is likely to see credit growth remaining subdued for the medium term.

"Westpac is well positioned to respond to this environment because of solid operating momentum across all divisions, combined with a very strong balance sheet.

"In the 2012 Financial Year we are stepping up our strategy implementation work, building on the solid foundation laid in recent years. In this next phase we will be:

" Taking multi-brand to the next level, sharpening brand differentiation while leveraging the scale of shared technology and support platforms;

" Taking the next step in our productivity agenda, driving simplification and standardisation across our operations and implementing new sourcing arrangements;

" Using our relationship management strength to further deepen customer relationships with a primary focus on deposits, payments, trade and wealth;

"Continued strengthening of the balance sheet with a particular focus on improving the asset/liability mix."

Westpac revealed yesterday that it incurred $90 million in restructuring costs during the year to September 30 and its employee numbers fell by 767 to 37,712 in the year.

That helped keep a lid on costs, with the important cost to income ratio down a fraction to 43.8% in the latest year, from 43.9% in 2010.

Westpac said its net interest margin in the second half was 2.21c in the dollar, up 4 basis points over the preceding half.

For the full year it was 2.19c in the dollar, down from 2.21c in 2010.

Westpac's second-half cash profit, improved slightly to $3.1 billion, compared with $2.93 billion reported a year ago.

Westpac's statutory net profit rose 10% to $6.991 billion.

Westpac's return on equity rose to 17.8%, from 17.4% and the bank's Tier 1 capital ratio rose 59 basis point to 9.7%,

The bank's total lending for the full year was up 4% to $496.6 billion mainly driven by mortgages, which rose by $17 billion.

Business lending fell $2 billion.

Westpac said bad debts declined 32% to $993 million from a year earlier, helping boost net profit.

Cash earnings at the retail and business banking division rose 1% to $1.949 billion.

Cash earnings at the institutional bank eased 2% to $1.487 billion, but they were up 12% at St George Bank to $1.167 billion.

Cash earnings rose 9% in the wealth management division BT Financial and jumped 41% in the bank's NZ operations.

A week after its 'we are not one of them' (our banking rivals) marketing campaign helped it to report a 19% jump in cash earnings to a record $5.5 billion, the NAB said yesterday that it would not be passing on the full 0.25% reduction from Tuesday's Reserve Bank rate cut.

The NAB said it would only cut its standard rate by 0.20% to 7.47% effective from next Monday, November 7.

That's less than the 0.25% cuts handed on by Westpac, the Commonwealth, Bank of Queensland and ME Bank on Tuesday afternoon, and the ANZ and Bank of Melbourne yesterday.

The NAB group executive Lisa Gray justified the move by saying, "Our commitment is to be competitive and for more than two years, NAB has offered the lowest standard variable home loan rate of any of the major banks".

"NAB has led the industry and abolished the most disliked fees, including overdrawn fees, account keeping fees and mortgage early exit fees for new and existing customers," she said. "NAB customers will today still benefit from having the lowest standard variable rate of any of the four major banks."

NAB also said it would trim a "range of deposit interest rates by between 5 basis points and 25 basis points".

In the year to September 30 the NAB reported that its net interest margin was steady at 2.25% (or 2.25c in the dollar) for the year, but rose in the second half to 2.28% from 2.23%.

Much of that was due to the large increase last November (on top of the 0.25% increase from the RBA).

So after grabbing extra last year when rates rose, it's fattening up its bottom line by withholding some with the rate cut.

More give, less take is the NAB's current advertising slogan - Ha!

Copyright Australasian Investment Review.
AIR publishes a weekly magazine. Subscriptions are free at www.aireview.com.au

Westpac has joined its other big rivals in reporting a record profit for its latest financial year, with cash earnings rising to $6.301 billion.

As large as the profit numbers are, though, investors may not be satisfied; the result was a touch short of market forecasts.

But analysts dismissed that slight miss and the poor market reaction which saw the bank's shares lose 2.5% or 55c to $21.39, thanks to the latest round of fears about Greece and the eurozone.

The cash result was up 7% (the NAB's was up 19% on a cash earnings basis to a record $5.5 billion and the CBA saw a 12% rise to a record $6.8 billion).

All in all the trio earned more than $18.6 billion in the 2011 financial year.

The ANZ is expected to reveal earnings of more than $5 billion later today.

Westpac said it had declared a record fully franked final dividend of 80c per share, up 4c, or 5% over First Half of 2011.

Total dividends for the year were 156c, up 12% over the prior year, and represented a pay-out ratio of 75%.

Westpac Group CEO, Gail Kelly said in the statement that: "It is pleasing to see evidence of our strategy delivering tangible benefits.

"Deeper customer relationships, measured by customers with four or more products, are a real strength at a time of more subdued economic growth. We are also growing overall customer numbers in each of our major brands.

"In addition, our customer experience is continuing to improve, aided by our investment in people, in technology and in simplified processes.

"We have continued to strengthen our balance sheet over the year. Our capital ratios are at the upper end of the banking sector globally and our funding position is materially enhanced, supported by customer deposit growth exceeding lending growth by $11 billion over the year. Our credit quality is better than that of our Australian peers."

Speaking about current economic conditions, Mrs. Kelly said," The global operating environment is clearly evidencing weakness with sovereign debt issues across the Euro zone and weak growth in the US. International events have weighed heavily on consumer and business confidence in Australia and are contributing to a softer outlook."

Mrs. Kelly added, "We are seeing our customers respond appropriately to increased uncertainty by increasing debt repayments and by saving more.

"This supported an 11% increase in our customer deposits," she added.

"Australia's economic fundamentals remain sound with solid employment, well controlled inflation, a robust mining sector and the benefit of proximity to Asia.

"While Australia is better positioned than most other developed nations, the current consumer and business caution is likely to see credit growth remaining subdued for the medium term.

"Westpac is well positioned to respond to this environment because of solid operating momentum across all divisions, combined with a very strong balance sheet.

"In the 2012 Financial Year we are stepping up our strategy implementation work, building on the solid foundation laid in recent years. In this next phase we will be:

" Taking multi-brand to the next level, sharpening brand differentiation while leveraging the scale of shared technology and support platforms;

" Taking the next step in our productivity agenda, driving simplification and standardisation across our operations and implementing new sourcing arrangements;

" Using our relationship management strength to further deepen customer relationships with a primary focus on deposits, payments, trade and wealth;

"Continued strengthening of the balance sheet with a particular focus on improving the asset/liability mix."

Westpac revealed yesterday that it incurred $90 million in restructuring costs during the year to September 30 and its employee numbers fell by 767 to 37,712 in the year.

That helped keep a lid on costs, with the important cost to income ratio down a fraction to 43.8% in the latest year, from 43.9% in 2010.

Westpac said its net interest margin in the second half was 2.21c in the dollar, up 4 basis points over the preceding half.

For the full year it was 2.19c in the dollar, down from 2.21c in 2010.

Westpac's second-half cash profit, improved slightly to $3.1 billion, compared with $2.93 billion reported a year ago.

Westpac's statutory net profit rose 10% to $6.991 billion.

Westpac's return on equity rose to 17.8%, from 17.4% and the bank's Tier 1 capital ratio rose 59 basis point to 9.7%,

The bank's total lending for the full year was up 4% to $496.6 billion mainly driven by mortgages, which rose by $17 billion.

Business lending fell $2 billion.

Westpac said bad debts declined 32% to $993 million from a year earlier, helping boost net profit.

Cash earnings at the retail and business banking division rose 1% to $1.949 billion.

Cash earnings at the institutional bank eased 2% to $1.487 billion, but they were up 12% at St George Bank to $1.167 billion.

Cash earnings rose 9% in the wealth management division BT Financial and jumped 41% in the bank's NZ operations.

A week after its 'we are not one of them' (our banking rivals) marketing campaign helped it to report a 19% jump in cash earnings to a record $5.5 billion, the NAB said yesterday that it would not be passing on the full 0.25% reduction from Tuesday's Reserve Bank rate cut.

The NAB said it would only cut its standard rate by 0.20% to 7.47% effective from next Monday, November 7.

That's less than the 0.25% cuts handed on by Westpac, the Commonwealth, Bank of Queensland and ME Bank on Tuesday afternoon, and the ANZ and Bank of Melbourne yesterday.

The NAB group executive Lisa Gray justified the move by saying, "Our commitment is to be competitive and for more than two years, NAB has offered the lowest standard variable home loan rate of any of the major banks".

"NAB has led the industry and abolished the most disliked fees, including overdrawn fees, account keeping fees and mortgage early exit fees for new and existing customers," she said. "NAB customers will today still benefit from having the lowest standard variable rate of any of the four major banks."

NAB also said it would trim a "range of deposit interest rates by between 5 basis points and 25 basis points".

In the year to September 30 the NAB reported that its net interest margin was steady at 2.25% (or 2.25c in the dollar) for the year, but rose in the second half to 2.28% from 2.23%.

Much of that was due to the large increase last November (on top of the 0.25% increase from the RBA).

So after grabbing extra last year when rates rose, it's fattening up its bottom line by withholding some with the rate cut.

More give, less take is the NAB's current advertising slogan - Ha!

Copyright Australasian Investment Review.
AIR publishes a weekly magazine. Subscriptions are free at www.aireview.com.au