Westpac hit by lower mortgage growth in H12018

The cooling housing market has squeezed profits from the residential segment.

Reuters reports that Australian major lender Westpac was hit by lower mortgage volumes due to a cooling housing market even as it reported better-than-expected half-year earnings.

Westpac reported a cash profit of $3.2b (A$4.25b) for the half year which ended March 31. Higher margins at the peak of the housing boom last year were offset by softer mortgage volumes, with home lending growth clocking in at 2% compared with 3% in the previous half.

“With the changes that have come through in the last year we may see that growth rate fall a bit,” chief executive Brian Hartzer said, referring to tighter credit and loan approval policies.

Home prices across Australia’s major cities declined for the seventh consecutive month this April. Rating agency Fitch stressed that the mortgage portfolio of of Australian banks could weather a significant housing downturn without experiencing significant losses.

The stable financial footing of the country’s lenders can weather the stress test conditions of house price declines ranging from 20-60% and default rates of 10-20%. “The tests showed that the banks' ratings would be resilient to the moderate scenarios, reflecting adequate capital buffers and strong profitability,” Fitch noted.

Here’s more from Reuters.