Australia’s third biggest lender, Westpac Banking Corp, has reported a dip in profits after it took a hit from a charge from the sale of its life insurance business, Reuters has reported.
The business also raised its cost guidance, drawing attention to higher unemployment and lower home prices into the next year, Reuters said.
Westpac revised its costs incurred target to $8.6 billion by 2024, a change from its previous target of $8 billion. The lender cited wage increases and continued regulatory costs.
The company’s cost target does not include its specialist business and some other items, Reuters said, with analysts at Citi having said that this suggests a total cost base of $9.2 billion for the 2024 financial year.
"This provides a clear point of differentiation from recent peer results, where revenue upgrades were mitigated by cost revisions," analysts at Citi said.
The lender’s shares dipped more than 3% to $23.38, with the wider market up 0.5%. Westpac did, however, see a 19% lowering of its annual operating expenses during 2022, as it saw lower asset writedowns and staff expenses, Reuters said.
Its cash earnings were 1.4% lower, at $5.28 billion for the year ended 30 September, beating a Morgan Stanley estimate of $5.23 billion. Westpac declared a final dividend of 64 cents per share.
While the result met a majority of analyst predictions, Reuters said that it shows Australia’s banks “at a precipice”.
As the start to benefit from rising interest rates, they are also squaring up to an anticipated downturn in home lending. Westpac’s lending margins did recover slightly in the second half versus the first half of the fiscal year, Reuters said, with full year margins down 13 basis points on the prior year.
Smaller rival Australia and New Zealand banking group saw a one-basis-point contraction in its full-year margins by way of comparison.
Westpac agreed the sale of its life insurance business to TAL Dai-ichi Life Australia Pty last year, in a $900 million cash consideration deal.
