Westpac profits jump 22% to $4b as it dumps cost-cutting target

Westpac’s half-year profit has surged by more than a fifth to $4 billion, as it dumped a plan to cut its cost base to $8.6 billion, citing pressure from high inflation and ongoing regulatory requirements.

The banking giant on Monday morning reported net profit rose 22 per cent to $4 billion in the six months to March, as it also lifted dividends by 15 per cent to 70c.

The profit result is ahead of market expectations, but the lender also announced it was scrapping a previous target to get its expenses down to $8.6 billion, after making more than $1 billion in savings since 2020.

Instead, chief executive Peter King said the bank would seek to lower its cost-to-income ratio, which fell to 45.9 per cent, relative to rival banks.

“We’re making this change due to expected continuing inflation pressure, ongoing and new risk and regulatory requirements, and our focus on growth,” King said.

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In the latest half, the bank’s net interest income rose 10 per cent, while the bank’s operating expenses fell 7 per cent, due partly to the sale of non-core businesses.

On the outlook, King said the bank’s loan portfolios were healthy, but the lender was preparing for a likely increase in customers under financial pressure.

“Interest rates are now closer to their forecast peak, but we are focused on how long they stay high and what this means for household budgets and discretionary spending. We expect to see more stress in the period ahead, particularly in small business,” King said.