Despite bad and doubtful debts almost doubling from $482 million to $931 million, Westpac (wbc.ASX:Quote,News) lifted net profit to $3.86 billion as pre-tax profit edged up 1 per cent to $5.22 billion.
But overall the banking industry suffered a 23 per cent slump in 2008 pre-tax earnings from $27.1 billion to $21 billion after a near trebling in bad debts to $6.8 billion.
It was the industry's first year of falling profit since 1992, The Australian reported.
Westpac chief executive Gail Kelly, like the other bank CEOs, repeatedly talked down the prospect of the economy contracting for two consecutive quarters, but acknowledged there would be a further deterioration in 2009, with GDP growth still expected to hold up at 2 per cent.
"The next couple of years will be challenging but we will avoid a recession; we are far better placed than other world economies," Ms Kelly told The Australian.
Cash earnings were 6 per cent higher at $3.7 billion, just within guidance last August of a 6-8 per cent increase.
Chief financial officer Phil Coffey said Westpac had expected to be in the middle of that range, but since then there had been a "rapid" deterioration in markets, as well as the need for $36 million in top-up provisioning for a large corporate exposure.
Constellation Capital portfolio manager Peter Vann said the result was in line with expectations, although the bank had performed better than expected on revenue, which was up 10 per cent, and deposits, up by 16 per cent.
"The underlying business is performing stronger, and while the loan loss ratio is higher, it's still very comfortable," he said.
"Westpac is sticking to its line on the St George merger and its transformation agenda, and buying St George will mean a more effective investment in technology, because it will be spent on a broader revenue base."
Westpac, along with Commonwealth Bank, has earned a premium rating after largely avoiding the structured credit exposures of its rivals.
Westpac was more conservative in its lending to large, troubled corporates. Total impairment charges were up 93 per cent to $931 million, representing 0.31 per cent of gross loans, up 12 basis points.
Mr Coffey said growth in provisioning slowed in the second half, up 15 per cent from $433 million to $498 million, but the nature of the losses changed.
"The first half was due to the financial crisis, while the second half was due to the economic downturn," he said.
In the second half, Westpac topped up its overlay provision for more challenging economic times by $76 million to $251 million.
Westpac shares ended 4c higher at $20.30.
Read the full story inThe Australian.
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