Westpac is seen as a laggard by many in the market, after the 200-year-old bank was rocked by a 2019 money laundering compliance scandal that sparked a management cleanup, costs more high and widespread change in the organization.
Mr King had previously pledged to cut costs by more than $ 2 billion to deal with the crisis in profitability, but analysts were unimpressed with the spending announced on Monday.
Macquarie analyst Victor German said an increase of around $ 460 million in spending in the second half of the year was the main source of disappointment in the result. He said the overall result looked “very difficult”, but the crucial question was whether the period of “rebasing” profits to a lower level was over.
“While we see a possibility of a recovery in the medium term, in the short term we remain cautious as the stock is likely to react to downward revisions of the consensus,” said Mr. German.
Westpac’s flagship mortgage lending business is struggling to maintain its market share, but results have shown signs of a recovery, with its mortgage portfolio growing 3% during the year and strong increase in new loans in the second half of the year.
The pick-up in mortgage lending, however, came with pressure on profit margins, which King said would continue.
Net interest margins, which reflect the costs of financing relative to what banks charge for loans, fell 4 basis points to 2.04 percent.
Morningstar analyst Nathan Zaia said the bank needed to compete on price to maintain market share, but its margins could come under further pressure in the coming year.
“It looks like in the mortgage business they’re starting to do a little better, but the question mark is how much of this comes at the expense of margin? ” he said.
Its profits were boosted by $ 590 million thanks to the reduction in bad debt provisions, unlike last year, when it took over more than $ 3 billion in bad loans.
On the economy, a critical influence on bank profits, King predicted that growth would rebound in the coming year as NSW and Victoria reopen after closings and households tap into more. large savings balances.
“Consumer spending is likely to increase significantly as states reopen and pent-up demand is released, especially supported by consumer optimism and significant savings,” he said.
As regulators seek to ease the boiling real estate market by limiting mortgage lending, King added that the bank expects house prices to rise again next year, albeit at a slower pace. slow.