Westpac Registers $1.5 Billion Quarterly Profit, to Cut Number of Tellers

Westpac reported on Thursday unaudited quarterly profit of $1.5 billion, a 3 per cent drop from the same quarter a year ago at $1.55 billion.

The quarterly results were disclosed along with plans to reduce the number of tellers in Westpac branches over the next five years. Chief Executive Gail Kelly said the bank would have smaller branches with fewer tellers and customer service staff, but would have more high-level staff to provide financial advice to customers.

She said the changes seek to meet the different demands of customers as Westpac places more focus on online banking.

Westpac had previously announced plans to axe over 400 posts and send 150 jobs offshore. On Friday, Westpac also increased its interest rate by 10 basis points to recover higher borrowing costs amid weak demand for loans.

The big four justified their out-of-cycle interest rate hike even if the Reserve Bank of Australia retained the overnight cash rate at 4.25 per cent and they made collectively $24.3 billion profit in 2011.

Kelly attributed the drop of $200 million in income related to market operations to worsening operating conditions in the December 2011 quarter due to slowing global growth and an escalation in the European sovereign debt crisis, which led to high market volatility and increased business and consumer caution.

Westpac hiked lending by 1 per cent in the December quarter from the September quarter. Its loan growth was funded mainly by customer deposits, which grew by about $5 billion in the December quarter.

"More recently, events to shore up liquidity in Europe have assisted in improving market sentiment, although given the fundamental issues in that region, we remain cautious about the outlook," Kelly said.

In a commentary on the Westpac quarterly report, Business Spectator's Stephen Bartholomeusz said the data gives a clearer and more contemporary insight into the conditions in the banking sector and Australian economy than Commonwealth Bank results, which yielded 19 per cent growth.

Similar to the National Australia Bank which reported a 9 nine basis points reduction in its net interest margin despite an 8 per cent improvement in profit, Westpac's net interest margin also went down by 10 basis points relative to its third and fourth quarters of 2011 average.

While the big four are experiencing rising funding costs from all sources of funds, including deposits, Bartholomeusz pointed out that with demand for credit from households and businesses so weak, "there is no volume growth to offset the margin squeeze."

The politics of home loans makes it difficult for the lenders to fully pass on those higher costs to borrowers.

Bartholomeusz pointed out that if the current settings remain in place throughout the rest of 2012, the banks' critics would have opportunities to speak against out-of-cycle rate increases, but the focus on excessive returns on equity may turn out to be misguided.