Australias Westpac posts lower CET1 ratio as provisions rise

(Reuters) – Westpac Banking Corp said on Friday its common equity tier-1 ratio in the first quarter fell sequentially as the lender increased provisions for bad debts.

The bank did not disclose a profit figure but said it incurred an impairment charge of A$184 million ($126.59 million), reflecting the rise in cost-of-living pressures.

Australias central bank has hiked interest rates nine times this cycle, by a cumulative 325 basis points, in a bid to combat runaway inflation.

Higher rates are starting to pressure borrowing capacity of customers and raised risks as loan repayments escalate, leading to a rise in banks risk weighted assets by A$2.8 billion to A$480.44 billion at December end, from A$477.62 billion at September end.

Westpac also paid out a 64 Australian cents per share final dividend declared in November, making a total payout of over A$2 billion, which also ate away at its CET1 ratio.

Other Australian lenders such as the Commonwealth Bank of Australia and National Australia Bank have also flagged headwinds from mortgage business, slowing credit growth and rise in bad debts earlier in the week.

The No. 3 bank in Australia said the CET1 ratio, a closely watched measure of spare cash, was 11.13% in December-end, compared with 11.29% at the end of September 2022 and a Citi estimate of 11.2%.

($1 = 1.4535 Australian dollars)

(Reporting by Savyata Mishra and Harshita Swaminathan; Editing by Krishna Chandra Eluri)