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Westpac predicts strong growth in credit demand

Westpac  (ASX: WBC) CEO Gail Kelly has delivered an upbeat outlook for the economy, suggesting that demand for credit will expand at the fastest pace since the global financial crisis — which could drive the bank’s profit above the $7.1 billion achieved last year.

Although Westpac, ANZ (ASX: ANZ), NAB (ASX: NAB) and Commonwealth Bank (ASX: CBA) delivered a combined $27.3 billion profit for the year, earnings were restricted as demand for loans and confidence throughout the market remained poor.

According to The Australian Financial Review, Westpac has now forecast that demand for loans, including mortgages, will increase by 5% in 2014 – up from 3.7% this year. Regarding the mortgage market in particular, the bank has forecast a 5.8% increase in lending next year compared to the 5% achieved this year.

Foolish takeaway

Westpac currently maintains the highest standard variable home loan rate out of the big four and has lost market share in the sector as a result, with lending increasing by just 4% over the last year. While Kelly would not comment on whether Westpac would reduce rates to win back customers, she said she is “encouraged by signs of improving confidence” which she expects will lead to an increase in lending activity.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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