(Reuters) – Australia Westpac Banking New York Stock Exchange (NYSE:) Corp. said Monday that third-quarter net income was largely in line with a year ago, as higher gains on capital and protected deposits offset rising expenses and bad loans.
Based on the company’s average quarterly performance in the first half of 2024, Westpac’s unaudited net profit showed a 6% increase.
The Reserve Bank of Australia has kept policy steady since November, having raised the cash rate by 425 basis points to 4.35% since May 2022 to curb inflation. The higher rate has allowed Westpac to achieve better returns on its invested capital.
High earnings from hedged deposits, where the bank has used financial instruments to hedge against interest rate fluctuations, suggest that the current interest rate environment may be working in Westpac’s favour.
However, a decade of high interest rates and rising cost of living pressures are affecting households’ ability to repay loans on time, adding to financial pressures on Australian banks.
“The cost of living and high interest rates remain a challenge for some customers while many businesses are facing cost pressures and experiencing a decline in demand,” Westpac said.
Despite these macroeconomic conditions, Westpac said its household deposits in Australia grew by 3% quarter-on-quarter, as it was able to attract more savings from customers.
The Sydney-based bank also reported 8% growth in Australian home loans, underscoring its ability to weather the fierce competition in the country’s mortgage markets.
The country’s third-largest bank by market value said unaudited net profit was A$1.8 billion ($1.20 billion) for the three months to June 30, compared with A$1.8 billion posted a year earlier.
The bank’s net interest margin – the difference between interest earned on lending and interest paid on deposits – was 1.82% compared to 1.86% a year earlier.
(1 USD = 1.5006 AUD)