Feb 3 (Reuters) - Westpac Banking Corp (WBC.AX) recorded a 20% drop in first-quarter cash earnings and warned that steep competition in mortgages would drag margins more this year, forcing the lender to bring forward organisational changes.
Australia's fourth-largest bank by market value said it cut headcount by more than 1,100 over the quarter, reduced corporate functions by around 20% and combined key management roles. It expects to book restructuring charges in both its half-year and full-year results.
Chief Financial Officer Michael Rowland said the environment "remains highly competitive, and we continue to see pressure on margins."
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Westpac is struggling with intense competition for mortgages amid record-low rates, with customers now considering a switch to fixed-rate loans that tend to be written at a lower margin than those at variable rates.
The bank's stock has lost about a fifth in value since November, when it reported a big drop in margins, a profit miss and slow progress in a costly turnaround to fix outdated software and convoluted procedures.
Still, Westpac on Thursday reiterated again that it would meet its A$8 billion ($5.71 billion) cost target by 2024.
Net interest margin, a key measure of profitability, fell 8 basis points in the first quarter to 1.91% from 1.99% in the second half of fiscal 2021.
While the bank beat consensus estimates for cash earnings, it set aside A$551 million more to cover the pandemic's hit to supply chains and certain sectors, resulting in an impairment charge of A$118 million in the quarter.
Cash earnings for the three months to Dec. 31 came in at A$1.58 billion ($1.13 billion), compared with A$1.97 billion reported a year ago. That was higher than the A$1.47 billion forecast by Citigroup and A$1.38 billion by Morgan Stanley.
($1 = 1.4015 Australian dollars)
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Reporting by Nikhil Kurian Nainan and Savyata Mishra in Bengaluru; Editing by Devika Syamnath
Our Standards: The Thomson Reuters Trust Principles.
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Australia's Westpac sees more margin pressure as cash profit drops 20% - Reuters
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