Major Australian bank Westpac on Tuesday reported $1.55 billion in cash earnings for April, May and June, down about 2 percent on the average for the first two quarters. Reported net profit after tax for the same period was approximately $1.45 billion.

Chief executive Gail Kelly, said the group’s third quarter performance was a sound outcome in a subdued operating environment.

The third quarter 2011 result reflected a rise in operating income of around 1.5 percent, flat expenses and higher impairment charges due to higher net interest income from sound balance sheet growth and a solid margin improvement.

“The momentum experienced in the first half 2011 continued in the third quarter 2011, with core earnings rising around 2% from improved contributions across our retail and wealth operations," the bank said.

The June quarter 2011, however, saw the operating environment become more subdued with consumers increasingly cautious and larger businesses continuing to de-leverage. This was reflected in slowing system credit growth in the quarter, and weaker markets.

As a result, Kelly said, Westpac is “stepping up our productivity initiatives both to improve revenue and to maintain efficiency advantage”.

The bank’s productivity initiatives seem likely to involve redundancies that will more than offset the increase in staff involved with the relaunch of the Bank of Melbourne.