Westpac Banking Corp (ASX: WBC) released its half-year results today with profits up and dividends flat.
For the six-month period ended 31 March 2016, Westpac revealed a 5% rise in revenue to $10.47 billion and a profit after tax of $3.7 billion, up 3% on the prior corresponding period.
Cash return on equity, a measure of profitability, fell 1.66% to 14.2% despite lending growing at very robust 6% during the half.
Meanwhile, Westpac's interim dividend held flat at 94 cents per share, while its capital position, (what is held in reserve for market setbacks) climbed to 10.5%. Earnings per share fell 4.3% to 109.2 cents.
"The quality and value of our franchise continues to grow, with increased customer numbers, deeper customer relationships and strategic technology investments that make it easier for customers to do their banking," Westpac CEO, Brian Hartzer, said. "At the same time we have continued to focus on controlling costs and delivering sustainable returns."
Impaired assets rose slightly to 0.26% of all exposures but impairment charges on the income statement rose from $341 million to $667 million – a 95% increase.
The bank's income from lending activities, known as net interest income, rose 10% to $7.65 billion, but the income raised from other sources (non-interest income) fell 4% to $2.97 billion.
"The Consumer Bank delivered strong home loan and deposit growth and well-managed margins," Mr Hartzer added. "The Business Bank also recorded sound balance sheet growth, particularly in SME, with margins stable over the period."
Westpac's institutional bank reported a 25% fall in profit citing impairment charges, lower performance fees collected and lower margins.
Outlook
Looking ahead, Mr Hartzer was mostly positive with the trends in place but also noted points of weakness.
"The main threat we see is from global factors, which create fragility in businesses and regions that are more dependent on mining and mining construction. We also see signs of moderating housing investment, although housing fundamentals remain in good shape."
Mr Hartzer expects a slight moderation in credit and deposit growth in 2016, as regulatory changes take a hold and housing activity eases. Corporate balance sheets remain in good stead, the bank said, though it expects a rise in consumer delinquencies during the second half.
Foolish takeaway
Westpac's result was largely expected by analysts and the market. However, the rise in impairment charges and modest outlook may set a cautious tone in trading today. Indeed, few investors like to see falling profits per share. However, despite a few blemishes, today's results appear robust.
