By Sameer Manekar
(Reuters) -Australian bank Westpac declared a special dividend on Monday and raised its share repurchase program by A$1 billion ($661 million) citing a strong balance sheet even as its first-half profit fell by 16% on intense competition and high costs.
Traditionally beneficiaries of rising interest rates, the country’s so-called Big Four lenders have spent the past year sacrificing margins to write new home loans and paying more to depositors, narrowing their closely watched “net interest margin”.
Westpac’s net interest margin slipped to 1.89%, down 7 basis points from a year ago, while net interest income remained largely flat at A$9.13 billion.
As a result, the country’s No. 3 lender by market value posted net profit of A$3.34 billion, below last year’s A$4.00 billion. That slightly missed Visible Alpha consensus estimate of A$3.43 billion compiled by UBS.
“While we’ve seen an uptick in stress in our loan books, this is to be expected given the large increase in interest rates, high inflation and taxation,” Chief Executive Officer Peter King said in a media release.
Westpac declared an interim dividend of 75 Australian cents per share and a special dividend of 15 cents apiece. It hiked its existing share buyback program by A$1 billion to A$2.5 billion.
The lender’s common equity tier 1 ratio – a key measure of spare cash – stood at 12.55%, 105 basis points above operating range, it said.
“We remain appropriately provisioned and with a strong balance sheet,” King added.
Last week, the country’s top business lender National Australia Bank (OTC:) also announced it would double a buyback program begun last August to A$3 billion even after it reported a 13% drop in its first-half cash earnings.
($1 = 1.5131 Australian dollars)
