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Dow Jones Newswires: Australia’s Westpac to buy back billions in stock as annual profit doubles

SYDNEY — Westpac Banking Corp. said its annual net profit more than doubled and it would seek to buy back shares worth up to 3.50 billion Australian dollars (US$2.63 billion).

Westpac
WBC,
-5.92%

said its net profit totaled A$5.46 billion in the 12 months through September, driven by a turnaround in impairment charges and lower notable items, as well as mortgage growth and momentum in its institutional and business portfolios.

Analysts had expected a full-year net profit of A$5.38 billion, according to FactSet’s consensus estimate.

“While notable items were lower, they remain elevated as we continue to work on fixing our issues and simplifying our business,” said Westpac Chief Executive Peter King.

Last month, Westpac signaled it expected to take a hit of A$1.3 billion to its reported net profit and cash earnings in the second half of the 2021 fiscal year due to a range of notable items.

The lender on Monday said it had an impairment benefit of A$590 million for the year.

Cash earnings–a measure tracked closely by analysts–roughly doubled to A$5.35 billion. Excluding notable items, cash profit rose by 33% to A$6.95 billion.

Directors of the lender declared a final dividend of A$0.60 per share, up from A$0.31 per share a year ago.

“Our improved operating performance and positive progress on our strategic priorities, including the completion of a number of divestments, have strengthened capital,” said Westpac Chairman John McFarlane when announcing the buyback.

It follows earlier buyback announcements from Australia’s other major banks–Commonwealth Bank of Australia
CBA,
+0.58%
,
Australia and New Zealand Banking Group Ltd.
ANZ,
-1.24%

and National Australia Bank Ltd.
NAB,
-0.28%

–as the country’s economic outlook improves and bad debts ease.

Westpac reported a CET1 capital ratio of 12.32% at year-end, up 119 basis points, and said credit quality was sound with stressed exposures to total committed exposures 1.36%, down 55 basis points.

“Following the buyback, Westpac will continue to have a strong capital position to respond to uncertainties, and to support growth and our customers. This capital position, together with surplus franking credits and the potential for further asset sales, creates flexibility for the board in its ongoing considerations on capital management,” said Westpac in a regulatory filing.

Westpac’s Australian mortgage portfolio was up 3% to A$14.7 billion over the year, which Mr. King said was a significantly better performance than 2020. Owner occupied lending rose 9%, while total customer deposits rose by 4%, or A$24.9 billion.

Australian business lending lifted 4% in the second half of fiscal 2021.

Westpac is forecasting the Australian economy to expand by 7.4% in 2022, with credit growth of 6.8%.

“Demand for housing is likely to remain elevated but home price increases should moderate to 8% next year,” Mr. King said.

Still, he said the company’s underlying results “were not where we want them to be, and we recognize we have more to do to become the high-performing company we aspire to be.”

“Margins were down in a competitive, low-rate environment, and as we foreshadowed, costs were much higher in fiscal 2021,” Mr. King said.

In 2021 Westpac paid or offered more than A$1 billion to approximately 1 million customers as part of customer remediation.

Mr. King said Westpac’s cost reset program, targeting an A$8 billion cost base by the 2024 fiscal year was under way.

“We expect our costs to begin reducing in the year ahead from our simplification and the completion of key programs in our Fix priority,” he said.

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