The Westpac Group (ASX: WBC) today announced a solid result for the half year to 31 March 2011, with cash earnings per share of 105.6 cents increasing 6 per cent compared to the six months to 31 March 2010.

Cash earnings recorded similar growth up 7 per cent compared to First Half 2010 and up 8 per cent on Second Half 2010. In the last 6 months, all divisions recorded growth in cash earnings with each delivering improved core earnings and lower impairment charges.

Impairment charges were down 47 per cent compared to First Half 2010 and were 20 per cent lower compared to Second Half 2010. The $463 million charge for First Half 2011 is around one quarter the size of the impairment charge peak in Second Half 2009.

Westpac declared a record fully franked interim dividend of 76 cents per share up 11 cents, or 17 per cent over First Half 2010, and up 2 cents over Second Half 2010. The higher payment maintains a consistent path of increased dividends since First Half 2009 and reflects a payout ratio of 72 per cent.

Statutory net profit increased 38 per cent to $3.96 billion, materially benefiting from the previously announced finalisation of tax consolidation associated with the St.George Bank merger.

Westpac Group CEO, Gail Kelly said: “This healthy result reflects building momentum across the business with strong financial disciplines. All divisions delivered improved financial results over Second Half 2010, something we’ve not seen since before the GFC.

“The performance of Westpac Retail & Business Banking was particularly strong with the benefits of our Westpac Local investment clearly emerging. BT Financial Group also performed well, with good flows into our investment platforms lifting wealth income which more than offset the cost of higher insurance claims relating to natural disasters.

“During this half we continued to strengthen our balance sheet with increased capital and additional liquidity while maintaining our very strong provisioning cover,” Ms Kelly said.

Natural disasters

In First Half 2011 significant natural disasters impacted the period including widespread flooding in Queensland and Victoria, a severe cyclone and the second major earthquake in
Christchurch, New Zealand.

The financial impact of these events on Westpac was around $140 million in pre-tax earnings in First Half 2011, which includes direct costs, additional insurance claims and higher provisions for estimated impairment losses.

Outlook

Westpac said despite ongoing consumer and business caution and the impact of natural disasters, the operating environment has remained broadly supportive.

Although caution is expected to remain, given a low Australian unemployment rate of 4.9 per cent and strong capital expenditure intentions, the bank expects sentiment to gradually improve over the remainder of 2011. As a result, business credit growth is likely to recover, although the timing remains uncertain.