Australia's Westpac Banking Corp on Monday warned of 'intense' mortgage competition pressuring its margins in the current half, and said it was dropping a cost target to instead focus on relative peer performance because of high inflation.
A pedestrian looks at his phone as he walks past a logo for Australia's Westpac Banking Corp located outside a branch in central Sydney, Australia, November 5, 2018. REUTERS/David Grayon Monday warned of "intense" mortgage competition pressuring its margins in the current half, and said it was dropping a cost target to instead focus on relative peer performance because of high inflation.
Westpac, which previously benefited from a bold cost-cutting strategy, disclosed plans to move away from an absolute expense target and to focus more on improving its expense-to-income ratio in comparison to its peers. "We're making this change due to expected continuing inflation pressure, ongoing and new risk and regulatory requirements and our focus on growth," Westpac CEO Peter King said in a statement.
Westpac, the country's No. 3 bank, also said credit growth in housing and business lending was starting to ease after reporting a 22% jump in net profit to A$4 billion for the six months ended March 31. Australian lenders have relied heavily on mortgages and retail deposits, but that is now threatening to hurt profitability as competition intensifies and weakens margins.
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