Westpac loan impairments soar to $211 million

Westpac NZ suffered a 47% drop in cash earnings in the six months to March, and says Covid-19 will lead to loan impairments of $211 million. 

The stark figures came as the big four bank outlined its half-yearly results, covering the period up to March 31.

The period coincided with the early stages of the Covid-19 outbreak. Westpac believes the ongoing crisis will lead to a significant hit on its profits and loan book as the full picture becomes clear.

In a statement, the bank said "a significant increase in expected loan impairments" had caused it to increase its impairment charges from $4 million to $211 million. 

It added home loans grew by 7% over the period, with business lending up 5% year-on-year. 

Westpac NZ chief executive David McLean said: "Westpac NZ has both the financial strength and the commitment to New Zealand to help support the economy to recover. Nevertheless, the Covid-19 impact on the economy will be felt in banks’ financial performance."

Like its rivals the bank has granted thousands of hardship requests to borrowers.

The bank granted mortgage deferrals to 22,118 customers to April 2020, on loans totalling $7 billion. 

Over the period, Westpac said it has provided $1.4 billion in new lending to 1,129 business customers. It has converted $1.4 billion of business loans to interest-only or reduced repayments.

Westpac said it was working hard to change processes and systems to adapt to the post-Covid-19 world.

McLean said work continues "on improving processes and systems at Westpac NZ to benefit customers". "In some cases this had been accelerated by the lockdown period and the uptake in digital banking," he added.

McLead said the bank was focused on "delivering new and innovative products and experiences" to help customers and align with regulators' expectations.

"Covid-19 is forcing us, and many others, to work in a completely different way and it’s exciting seeing how our teams are responding to the challenge. I’m confident our organisation will be more agile and resilient when we emerge from the Covid-19 era," McLean added.

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