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  • Westpac (WBC) is shifting its focus to further cost-cutting measures after reporting a massive recovery in half-year earnings
  • Net profit for the first half of 2021 jumped to $3.4 billion — a 189 per cent increase compared to last year
  • Cash earnings also soared 256 per cent to $3.5 billion
  • In an effort to maintain profitability, the bank said it would aim to cut its costs to $8 billion by 2024
  • This would involve a greater focus on digital banking, including branch reductions and a consolidation of the products it sells
  • Shares in Westpac are up 3.56 per cent to $25.87

Westpac (WBC) is shifting its focus to further cost-cutting measures after reporting a massive recovery in half-year earnings.

Net profit for the first half of 2021 jumped to $3.4 billion — a 189 per cent increase compared to last year — while its cash earnings soared 256 per cent to $3.5 billion.

In an effort to continue the trend, however, Australia’s second-largest bank said it would aim to cut its costs to $8 billion by 2024. To do so, Westpac said it would focus more on digital banking, including branch reductions and a consolidation of the products it sells.

Peter King, CEO of Westpac, said the first-half earnings were primarily due to a $372 million impairment benefit, which bolstered the impact of the rapidly recovering employment and housing markets.

“Our Australian mortgage book increased $2.6 billion over the past six months, with good growth in owner occupier loans partly offset by lower investor lending,” he said.

“Owner occupier loans increased three per cent, with first home buyers making up 13 per cent of new loans.”

Westpac’s three-year “cost reset plan” is designed to establish a more streamlined, simpler organisation. As part of the plan, the bank said it would maintain its level of investment, pumping between $3.5 billion and $4 billion back into the business over the next three years.

As a result, costs are expected to increase over the rest of this year, before starting to fall in 2022.

“The main drivers are simplification and digitisation as we exit all specialist businesses and accelerate our digital transformation,” King said.

With such a strong first-half performance, Westpac has reinstated its dividends, which were cancelled last year after profits dived due to massive writedowns and provisions to account for the volatility brought on by the pandemic.

Shareholders will receive 58 cents per share, representing 60 per cent of Westpac’s profits, on June 25.

While challenges will likely remain, Westpac said it expects Australia’s economy to expand by 4.5 per cent in 2021, adding to a 4.6 per cent increase in total credit while residential lending is anticipated to expand 6.5 per cent.

It cited a 49 per cent jump in new lending for housing compared to last year, including a 75 per cent jump from a low point in May 2020.

“While we expect continued increases in home prices, as the supply of houses for sale increases, the rate of house price growth will likely moderate,” King said.

Shares in Westpac are up 3.56 per cent to $25.87 as of 10:34 am AEST.

WBC by the numbers
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