Westpac profits bounce to $2b on lower bad debts

Westpac’s profits bounced back in the December quarter to $2 billion, as the lending giant joined rivals in saying the economy was on the mend and predicting a strong year in the mortgage market.

In a trading update on Wednesday, Westpac said its bottom line had benefited from lower bad debt charges, wider margins, and lower expenses due to short-term changes in its investment spending.

Westpac CEO Peter King expects a continued recovery in mortgage lending this year.Credit:Alex Ellinghausen

Unaudited cash earnings excluding notable items rose by 54 per cent to $2 billion, compared with the quarterly average for the September half.

Chief executive Peter King said most of the improvement in profit was caused by lower charges for impaired loans and improving credit quality, after the bank’s bottom line received a $501 million impairment benefit.

“While uncertainty remains around the impact of local COVID outbreaks, there is cause for optimism. The economy is recovering, consumer and business confidence is strong, and the labour market has been much more resilient than expected. At the end of December there were 12.9 million employed Australians compared to 13 million in March 2020,” Mr King said.

“We are also beginning to improve momentum in mortgages and while the book was little changed over the half, we have processed a significant increase in applications. Low interest rates, rising house prices, new construction, and high consumer confidence all point to continued recovery in home lending activity in 2021.”

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