Australia's Westpac reports lower margins, warns delinquencies on rise
* Westpac says Q3 NIM 11 basis points lower than previous
* NIM result "disappointing" and "negative" - analyst
* Higher 90-day delinquencies in mortgage loans - Westpac
* Shares fall almost 3 pct in steady broader market
(Recasts, adds analyst quote, shares, delinquencies increase
By Paulina Duran
SYDNEY, Aug 24 (Reuters) - Australia's Westpac Banking Corp
, the country's second-biggest lender, on Friday
reported a steep drop in quarterly margins on higher funding
costs and cautioned that mortgage delinquencies were on the rise
in most states.
The drop in net interest margin (NIM), a key gauge of
profitability for banks, comes at a time of subdued credit
growth in the country, where tighter lending and hikes in
short-term interest rates are squeezing housing loan earnings.
Westpac said its NIM, the difference between interest paid
and earned, shrank 11 basis points to 2.06 percent in the
quarter ended June, compared to 2.17 percent at the end of the
six months to March and the lowest since the first half of 2015.
Shares of the lender fell almost 3 percent to its weakest in
two months in a broader market that was mostly steady.
"The NIM outcome is disappointing," Morgans banking analyst
Azib Khan said. "They are really calling out the negative here,"
he said, adding that higher funding costs were hurting the
broader banking sector.
Growth in Australian home loans fell to a four-year low of
5.6 percent in June, while short-term funding costs had more
than doubled from their levels in August 2017.
According to Moody's Investment Service, many small and
midsize banks have raised their home loan rates in the face of
higher wholesale costs and slower loan growth.
But Australia's four major banks, which dominate about 80
percent of the home loan market, have held off so far, partly
due to intense public scrutiny amid a powerful national inquiry
that has led to damaging revelations of widespread misconduct in
Australia's financial sector.
Two of the 'Big Four' – Commonwealth Bank and
Australia and New Zealand Banking Corp - have in fact
lowered some mortgage rates to attract borrowers.
Credit ratings agencies have warned that borrowers, hit by
the rising costs of living, could struggle to cover principal
and interest payments for a record amount of home loans taken
out in 2014-2015 that are set to become due soon.
Westpac noted delinquencies were rising across most states,
with the overall percentage of loans that are 90-days overdue
three basis points higher during the June quarter.
It also flagged higher stressed exposures in its corporate
property and retail portfolio over the same period.
Westpac's home loan book, however, grew at 6 percent for the
12 months June, faster than the other three major banks.
"Whilst the NIM outcome is weak there is an offsetting
outcome which is the strong loan growth," Khan said.
Westpac said total stressed assets fell slightly in the
third quarter and it also reported lower impairments in its
smaller mining and New Zealand dairy portfolios.
Its common equity Tier-1 capital ratio dipped to 10.4
percent at the end of June from 10.5 percent at end-March.
It did not disclose profit or revenue numbers in its
disclosures. The bank will report full-year results in November.
(Additional reporting By Rushil Dutta in Bengaluru; Editing by
First Published: 2018-08-24 02:16:11
Updated 2018-08-24 04:54:20
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