Westpac third qtr cash earnings at $1.1b

Westpac Banking Corporation posted third-quarter cash earnings of $1.1 billion,
little changed from past quarters, as bad debts continued to rise at Australia's
biggest bank by market value.

Shares in Westpac fell over two per cent after the Sydney-based bank said
impairments for the three months to June 30 increased to $865 million from $811
million in the preceding quarter.
The rise in bad debts mainly reflected continued deterioration in the commercial
sector and in New Zealand.
"On the risk fron, the bad debt cycle is continuing to work its way through," chief
executive Gail Kelly said on Friday.
"It's difficult to be precise as to when the impairment cycle may peak."
Westpac's third-quarter update, coming after Commonwealth Bank of Australia Ltd's
full-year report last week, confirms the country's banks are profitable but are
keeping a watch on borrowers who may be in trouble.
Westpac shares fell 57 cents, or 2.45 per cent, to close at $22.74. They closed at
an 11-month high of $24.40 on August 14.
Austock Securities analyst John Buonaccorsi said the cash profit figure was a little
below what he had expected, while the bad debt and stressed assets figures probably
spooked the market.
"The banks have had a great run and the market was looking for something better from
them," Mr Buonaccorsi said.
"People were looking for an excuse to take some money off."
Mr Buonaccorsi is reviewing his Buy rating on Westpac as his 12 month target price
for the stock is $23, close to the current price.
Westpac increased its watchlist facilities during the quarter as it tried to manage
risk following the rapid economic deterioration over prior quarters.
That took the total of stressed exposures to 2.8 per cent of total committed lending
from 2.1 per cent at the end of the first half in March.
"It's a deliberate approach ... to identify potential issues early, to ensure we can
best assist customers and provide expert risk attention," Mrs Kelly said.
Stressed exposures were unlikely to rise as fast in coming months, she said.
Mr Buonaccorsi said the market may have found the increase a bit scary.
About half of the rise in the watchlist was in property related lending, with the
other half spread across industries.
Of the bad debts, New Zealand accounted for $230 million - most from two companies.
Mrs Kelly described the NZ impairments as the "low light" of the quarter.
The bank warned that average funding costs were continuing to rise, and as a result,
customer rates also would rise while Australia's credit growth was still slowing.
Westpac's total lending during the quarter grew 1.3 per cent, led by Australian
mortgages.
Lending in New Zealand and in the institutional and business banking area slowed,
reflecting New Zealand's weaker economy and business's efforts to reduce debt.
The Australian consumer portfolio performed well, with a small decline in
delinquencies, both in mortgages and unsecured lending.
Deposits during the quarter increased 2.3 per cent, which helped fund new lending.
Westpac said its capital position was strong with its Tier 1 ratio at 8.2 per cent
as of June 30.
The bank said it benefitted from the reopening of global capital markets which,
together with deposit growth, made Westpac's funding profile strong.
The bank has a funding buffer of over $65 million.
Westpac's merger with St George is progressing smoothly and the bank is on track to
achieve $120 million in expense synergies by the end of fiscal 2009.
St George's business growth was restored in the third quarter, as the brand grew
mortgages 1.2 times system growth and deposits at double the rate.