Australia's Westpac posts stable third-quarter profit, helped by higher capital gains By Reuters

(Reuters) – Australia Westpac Bank (NYSE:) Corp said on Monday its third-quarter net profit was largely in line with a year ago as rising capital gains and covered 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 an increase of 6%.

Australia's central bank has kept policy steady since November, having raised the cash rate by 425 basis points to 4.35% from May 2022 to control inflation. The rate increase allowed Westpac to generate better returns on its own invested capital.

Higher gains from covered deposits, those where the bank has used financial instruments to protect against interest rate fluctuations, indicate that the current interest rate environment could be working in Westpac's favour.

However, multi-decade high interest rates and rising cost-of-living pressures are affecting households' ability to repay loans on time, increasing financial stress for Australian banks.

“Cost of living and high interest rates remain a challenge for some customers, while many businesses are facing cost pressures and experiencing lower demand,” Westpac said.

Despite these macroeconomic conditions, Westpac said its Australian household deposits grew 3% on a quarterly annualised basis as it was able to attract more customer savings.

The Sydney-based lender also reported 8% growth in Australian home lending, underscoring its ability to navigate intense competition in the country's mortgage markets.

The country's third-largest lender by market value said unaudited net profit was A$1.8 billion ($1.2 billion) for the three months ended June 30, compared with A$1.8 billion a year earlier.

The bank's net interest margin – the difference between the interest earned on loans and the interest paid on deposits – stood at 1.82%, compared with 1.86% a year earlier.

($1 = 1.5006 Australian dollars)