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Westpac Group home lending increases by $14.7bn

The major bank’s margins were squeezed by competitive pressures in the home loan landscape, as its book grew by 3 per cent in the 2021 financial year.

Between September 2020 and September 2021, Westpac Group's (Westpac) Australian home loans book grew by $14.7 billion, according to the banking group’s latest annual report.

The report, which was released on Monday (1 November), reveals that as at 30 September 2021, Westpac had secured $456 billion in gross Australian housing loans. 

Comparatively, the group registered flows of $441 billion in 2020 - which was down on $449 billion the year before. 

According to Westpac, the 2021 figure is the result of “market growth, improvements in credit decisioning and processing times”. 

“This growth was in owner occupied lending, up $23.8 billion, partly offset by a reduction in investor lending of $7.5 billion,” it said. 

The group saw particularly strong gross mortgage activity in the second half of 2021, at $12 billion.  

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During the first half of 2021, this figure was $2.6 billion.   

“Restoring mortgage and business lending growth was a major focus this year and we are building momentum in both areas,” the report stated. 

“We reached our target to grow mortgages in line with the major banks in the second half of the year. Through the year we employed more mortgage bankers, addressed key processing bottlenecks, and ensured our pricing was responsive to the competitive pressure in the market.”

According to Westpac, 43.3 per cent of new home loans during the second half of 2021 were direct originated (proprietary channel) and 56.7 per cent were broker originated.

The group's total loan book at financial year end was 52.8 per cent proprietary, 47.2 per cent broker.

Mortgate Business understands that the approval times are now in line with the broader industry and have improved over the last year.

The sum for this year’s gross business lending was a $900 million increase from last year, according to the report, at $148 billion. 

Not all lending experienced a surge upwards, with Australian personal lending decreasing $2.3 billion and auto finance, as one example, declining by $1.1 billion. 

The report additionally notes varying differences in the net interest margin and Westpac’s impairment/benefits over the FY21, with the former dropping from FY 2020’s 2.08 per cent to 2.04 per cent. 

The latter however flipped from the loss of $3.18 billion during FY20 to reportedly $590 million during FY21.

Net interest income was also reported to have increased by $162 million, or 1 per cent, comparative to 2020. 

Westpac’s New Zealand gross lending similarly saw signs of growth, rising from September 2020’s reported sum of $82 billion to $89 billion, as of September 2021. 

According to the group, higher housing lending “supported by continued market strength” assisted in this increase, while a decline in business lending offset this surge. 

Streamlined lending

Westpac also highlighted that, over the year, it had begun a process of simplification, reducing the number of products, non-core businesses, and correspondent relationships. 

According to the report, four non-core businesses were sold over the year, while another three were put up for sale. Additionally, Westpac reduced its correspondent relationships by 286 and closed two of its international offices, with another three expected to be finalised by the end of the 2022 calendar year. 

However, this period also saw a distinctive drop in the number of products offered, the report stating that 284 have now been mothballed. 

Speaking of the change in the number of lending products, Westpac Group chief executive Peter King said, at Westpac’s ​​full-year results briefing, that the number of mortgages specifically have been cut from 161 to 68, “halving the associated fees”. 

“This is reducing complexity, allowing us to better focus on core banking in Australia and New Zealand,” Mr King added. 

Overall, the group’s cash profit shot up to $5.35 billion but net interest margin was 4 basis points lower, at 2.04 per cent.

[Related: Macquarie reports 14% mortgage growth in 6 months]

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