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Westpac maintains 2024 cost target, profit tops estimates

Westpac maintains 2024 cost target, profit tops estimates

Westpac Banking Corp of Australia said on Monday it was on track to fulfill its expense targets by 2024, despite inflation forcing peers to abandon cost-cutting efforts, and the lender’s half-year earnings topped expectations, sending its shares up 3%.

The country’s third-largest bank predicted that second-half costs for fiscal year 2022 would be flat to 2% lower than the previous year, indicating that its daring cost-cutting approach was paying off.

Westpac, which is coming out of a costly turnaround to fix antiquated software and cumbersome banking procedures, said it cut almost 4,000 positions in the first half and cut expenses by 27% compared to the second half of 2021.

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Unlike competitor National Australia Bank (NAB.AX), which canceled its cost-cutting goals last week due to rising inflation, the bank restated its commitment to keep costs under A$8 billion ($5.60 billion) by fiscal 2024.

“Keeping their FY24 cost target while peers abandon theirs is likely to spark some market controversy,” Citibank analysts wrote, describing the results as “a breath of relief” for shareholders.

The bank’s first-half earnings were down more than 12% due to severe competition in home lending, but they were above analyst expectations and put Westpac shares on course for their biggest single-day rise in two months.

In the first half, the net interest margin, a key profitability measure, declined 15 basis points to 1.91 percent, due to competition and borrowers switching to fixed-rate loans.

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Despite the fact that many more rate hikes are likely until 2023, Chief Executive Officer Peter King believes that mortgage consumers are ready.

“The housing market is seeing a decrease in turnover. Clearance rates are decreasing. I believe the market is correcting itself “On a conference call with reporters, King emphasized the impact of higher inflation on the housing market.

Low-interest rates and a pandemic-fueled move to remote working have boosted Australia’s “Big Four” banks’ home lending, which has boosted property markets.

Last week, the Reserve Bank of Australia lifted its cash rate by an unusually significant 25 basis points to combat rising inflation, signaling that additional hikes will follow during the year.

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Following suit, Westpac and its “Big 4” peers raised lending rates by a quarter of a percentage point.

The lender’s cash earnings for the six months decreased to A$3.10 billion ($2.19 billion) from A$3.54 billion the previous years, but they surpassed the Visible Alpha consensus forecast of A$2.83 billion.

After the LME trade upheaval, the CME is looking at a nickel contract, according to sources.

CME Group is in talks with market participants about creating a cash-settled nickel contract to help corporations hedge the cost of raw materials for electric vehicle batteries.

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