Westpac share price in focus following $1.8b quarterly profit

How are Westpac's margins holding up in the current environment?

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All eyes will be on the Westpac Banking Corp (ASX: WBC) share price this morning following the release of the banking giant's third-quarter update.

Let's take a look to see what Australia's oldest bank reported.

Westpac share price in focus following $1.8 billion quarterly profit

  • Unaudited quarterly profit of $1.8 billion
  • Group net interest margin (NIM) up 10 basis points on first-half average to 2.06%
  • Core NIM down 4 basis points to 1.86%
  • CET1 capital ratio down 42 basis points to 11.9%

What happened during the quarter?

For the three months ended 30 June, Westpac delivered an unaudited net profit of $1.8 billion. Management notes that this was driven by resilient operating revenue, assisted by ongoing disciplined margin management.

Speaking of margins, Westpac's NIM for the quarter was 2.06%. This is up 10 basis points from the first half.

This NIM comprises a core NIM of 1.86%, which was down 4 basis points due to ongoing mortgage competition, Treasury and Markets income up 2 basis points to 10 basis points, and gains related to hedging of 10 basis points.

Inflationary pressures impacted expenses which reflected both higher supplier costs and salary and wages. Expenses so far in the second half of FY 2023 are up approximately 5% compared to the first half average. However, management remains committed to cost discipline with recent cost reset actions driving a full-time equivalent employee reduction of approximately 2% for the second half to date.

Westpac advised that it remains in a strong financial position with capital, funding and liquidity well above regulatory minimums. The quarterly average liquidity coverage ratio was 138% and net stable funding ratio was 118%.

Credit impairment provisions were $5.1 billion at 30 June 2023, which is $1.5 billion above the expected losses of the base case economic scenario.

Finally, there was a modest increase in stressed assets to 1.16% of total committed exposures, a rise of 6 basis points from March. This was reflected in credit impairment charges to average loans of 12 basis points for the nine months to 30 June.

The Westpac share price is down 2.5% over the last 12 months.

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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