Westpac will increase its focus on growth in 2014 as the bank looks to build on another record profit.
Westpac made a cash profit of $7.1 billion for the 12 months to September 30, an increase of eight per cent on last year’s result.
The bank achieved the result through a modest three per cent rise in net interest income, stronger demand for home lending and a 30 per cent fall in bad debt charges.
Chief executive Gail Kelly said it had been a good year for the bank, with all of its divisions recording solid earnings growth during the year.
“I am thrilled with the result and I’m particularly looking forward to driving this momentum through to another good result next year,” she said.
She said Westpac would focus more on growing its business in 2014.
“We have been very clear in calling out that our priorities over the last 18 years have been strength and return,” she said.
“But we are tilting this priority focus to picking up a little more growth as we go into the 2014 year.”
Mrs Kelly said the pursuit of growth would not come at the expense of Westpac’s lending standards, which have helped it accumulate higher capital reserves than its big four bank rivals.
“We are very conscious of the risk standards that we have and we are certainly not going to compromise that,” she said.
“For us it’s not about going up the risk spectrum to compete, its about showing that we can grow using the tools at our disposal,” she said.
She said the recent increase in demand for home loans and stronger consumer confidence would likely help drive growth over the next year.
But Invast chief market analyst Peter Esho said the growth, especially in the home loan sector, could come at the expense of the Westpac’s margins.
Westpac had a net interest margin – the difference between the rate it pays its deposit holders and the rate it charges borrowers – of 2.14 per cent for the 2013 financial year.
Mr Esho warned that could fall below two per cent as the big four banks compete for a greater share of the home loan market.
“We think margins will come under pressure and if there is a price war for residential mortgages Westpac will be the biggest loser because of its sensitivity to domestic mortgages,” he said.
Westpac announced a fully franked final dividend of 88 cents per share, taking the full year dividend to $1.74 per share, which is up five per cent on last year.
The bank will also pay a fully-franked special dividend of 10 cents per share, which comes on top of a 10 cent special dividend announced earlier in the year.
Westpac shares fell 42 cents, or 1.21 per cent to $34.16 during Monday’s local session.
