Westpac has painted a bleak outlook for the economy after posting a weaker than expected $1.5 billion quarterly profit.
Chief executive Gail Kelly said Europe’s debt problems continued to raise the cost of the bank’s funds sourced from overseas, while there had been signs of softness in the domestic economy.
Recently launched restructuring plans were progressing despite the tough decision to cut job numbers, Ms Kelly also said.
Westpac’s unaudited cash profit in the three months to December 31 was $1.5 billion, down three per cent from $1.55 billion in the previous corresponding period.
Analysts had been expecting a first quarter cash profit of about $1.6 billion.
Westpac shares lost 74 cents, or 3.53 per cent, to $20.22.
NAB’s unaudited cash profit for the three months to December was $1.4 billion, while ANZ reports its cash profit for the same period on Friday.
Commonwealth Bank on Wednesday posted a $3.58 billion first half cash profit.
“Market consensus numbers will most likely be revised lower for the full year until Westpac can show the first quarter woes were mostly one-off and momentum can start to improve in the second and third quarters,” City Index market analyst Peter Esho said.
The main contributor to the cash profit decline for Westpac was a sharp fall in revenue from its markets and treasury divisions.
Ms Kelly on Thursday was far from positive about the general economic outlook.
“Funding markets were tough as the escalation of the European political standoff added to the already volatile market,” Ms Kelly said.
“The Australian economy was also showing signs of softening as consumers and businesses further tightened their already-conservative stance.”
Deposits with Westpac grew by $5 billion in the three months of the bank’s financial year to December 31, enabling it to fund one per cent growth in loans without the need for expensive funds from offshore.
The net interest margin, an indicator of the profit made on loans, was down 10 basis points compared to the average margins in the third and fourth quarters of the 2011 fiscal year.
“In December and January, pressure on margins further increased, from both competition in term deposits and from wholesale funding markets, where costs have been materially higher,” Ms Kelly said.
The recent 10 basis point rise in Westpac’s home loan rates “will help to offset this pressure”, she said.
Expenses rose by two per cent compared to the final two quarters of fiscal 2011, due to the bank’s restructuring program that involved a reduction in staff.
Earlier in February, Westpac said it planned to cut more than 400 jobs and send up to 150 more offshore as part of that restructure.
