Westpac has had a significant fall in full-year profit as Covid-19 led to lower revenue and a rise in bad debts.
Photo: RNZ / Nate McKinnon
The bank's after tax profit fell 43 percent to $550 million from $964m, while the cash earnings, which exclude one-off costs, fell 38 percent to $649m.
Chief executive David McLean said every part of its business had been affected.
"Almost every customer has been financially affected by Covid-19, whether that's directly through losing a job or taking a hit to their business revenue, or indirectly through lower interest rates or KiwiSaver volatility."
Westpac chief executive David McLean Photo: Supplied
Income fell 6 percent as margins were squeezed by the fall in interest rates, while its costs rose 7 percent, with the amount set aside for bad and doubtful debts rising three fold to $320m.
"We've provisioned for an increase in expected lending losses due to changing economic conditions, largely driven by Covid-19. However, our underlying asset quality remains strong," McLean said.
He said lending rose 6 percent, and unlike many other banks had increased lending to the rural sector, while lowering charges for small businesses, and given $9bn worth of new and restructured lending to business. Customer deposits had increased 10 percent.
McLean said the bank was prepared for lower interest rates. The Reserve Bank has told retail banks to be ready from the start of December to cope with negative interest rates, and there is a widespread view among economists that the central bank will drop the official cash rate below zero from April onwards.
"This may compress bank lending margins but we're in robust shape and are well equipped to weather those pressures."
Westpac's profit slide mirrors that of ANZ last week, which cited similar reasons for the decline. No dividend has been declared after the RBNZ directed banks to preserve their cash and not pay out to their Australian owners.