Westpac unveils share buyback as profits double to $5.4b

Westpac is regarded as a laggard by many in the market, after the more than 200-year-old bank was rocked by a 2019 money laundering compliance scandal that sparked a management clean-out, higher costs, and widespread change in the organisation.

Its flagship home loan business has also been struggling, but Mr King said it was making progress in turning it around, with 3 per cent growth in its mortgage portfolio over the year, an improvement on last year.

Net interest margins, which reflect funding costs compared with what banks charge for loans, fell 4 basis points to 2.04 per cent. Its profit received a $590 million boost from cuts to provisions for bad debts, in stark contrast to last year, when it took charges of more than $3 billion for soured loans.

On the economy, a critical influence on bank profits, Mr King predicted growth would rebound over the year ahead as NSW and Victoria re-opened up from lockdowns and households dipped into large savings balances.

“Consumer spending will likely increase significantly as states re-open and pent-up demand is released, particularly supported by consumer optimism and sizeable savings,” he said.

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As regulators seek to dampen the red-hot property market through curbs on mortgage lending, Mr King added the bank expected house prices to rise further next year, albeit at a slower pace.

“We expect the Australian economy to expand by 7.4 per cent in 2022, with credit growth expanding 6.8 per cent. Demand for housing is likely to remain elevated but home price increases should moderate to 8 per cent next year,” he said.

Mr King has previously vowed to slash more than $2 billion in costs to deal with the crunch on its profitability, though some in the market warn such deep cuts could harm the business.