Westpac loan book hits $467.6bn

On Monday (7 November), Westpac Banking Corporation (Westpac) released its financial results for the full year ending September 2022, revealing improved growth in its Australian mortgage book.

Between September 2021 and September 2022, Westpac''s loan book rose by 2.7 per cent, from $455.7 billion to $467.6 billion, the results show.

Owner-occupied mortgages drove net consumer loan book growth by $11.9 billion or 3 per cent, while its net business loans reached $6.5 billion or 8 per cent higher with growth across most sectors, it confirmed.

Despite interest rates having risen over the year (starting with May’s 25bp increase plus the 50-bp rises announced in June, July, August and September), the lender saw stronger growth in the second half of the year.

Between March and September 2022 , owner-occupier mortgages contributed an extra $10.5 billion the the loan book, adding to contributions of $3.9 billion in business lending and $11.2 in institutional lending.

As such, the major bank's Australian loan book totalled $739.6 billion as at 30 September 2022.

“In 2022, we’ve delivered a solid financial result and made steady progress on our strategic priorities,” Westpac chief executive Peter King said.

“We’ve built positive momentum and positioned the company for the future.

“I’m pleased with our overall performance.

“We sharpened our focus on core banking, reduced costs, and improved service to customers.

“Westpac returned to growth in our key segments of Australian mortgages and business lending.

“After the work of the past two years, Westpac is now a simpler, stronger bank. We’re continuing to get our costs down, we’re simplifying our operations and our program of co-locating branches in similar locations is removing duplication.

“At the same time, we are investing in the right places, such as the launch of our digital mortgage and new personal finance management tools in the Westpac app.

“Most key credit metrics improved over the half, including a reduction in stressed assets and delinquencies. However, it’s important to acknowledge the challenges ahead as customers navigate the tougher environment.”

Mr King added that as a result of Westpac’s “simplification”, the bank has “sharpened [its] focus on performance”.

“Our mortgage book is growing in line with major bank system and time to approval has reduced,” he outlined.

“We have more work to do on investor mortgages, but we’re growing in business lending and results in the institutional bank have been strong, with loans up 26 per cent year-on-year.”

External factors and not hitting customer hip pockets

Outlining a range of global and domestic challenges, Mr King noted that Australia was “charting our way through a period of high inflation and rapid increases in interest rates.”

He observed, however that the bank had no yet seen increases in hardship or stressed assets.

“Many customers built up savings during the past two years and 68 per cent remain ahead on their mortgage repayments," Mr King explained.

“However, it is inevitable that the impact of higher rates will be felt, including when borrowers’ low fixed-rate loans are rolled over.”

As the new year approaches and there’s increased economic uncertainty, Mr King advised that the biggest challenge for the authorities is to contain the high inflation psychology that is “now taking hold in the economy”.

“In Australia, consumer spending is resilient, but as higher rates bite, we expect the heat to come out of the economy and inflation pressures to ease,” he said.

“Small business is one sector we are watching closely as consumption slows.

“Housing prices have fallen in recent months and this will continue into 2023.”

Ultimately, though, he concluded that credit growth is expected to ease, GDP growth will slow, and unemployment will rise.

“These will be necessary outcomes if we are to lower inflation,” Mr King stated.

“The economy remains robust and Westpac is well positioned to handle the road ahead. Our own portfolio is in good shape going into 2023.”

[Related: Westpac Group home lending increases by $14.7bn]