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.

Our top dividend stock

Shares in the banks are expensive at today’s prices and remain unlikely to deliver market-beating returns in the long-run. If you are looking for some stock ideas to add to your portfolio today, look no further than our #1 dividend-paying stock. Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

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

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.