Westpac has announced a net profit of $7 billion — which is actually a 3% drop versus same time last year.
👉 Background: Westpac, once known as the Bank of New South Wales, has a market capitalisation of ~$111 billion.
👉 What happened: Now, Westpac has announced a net profit of $7 billion — which is actually a 3% drop versus same time last year. The decline mostly came from Westpac’s consumer division which dropped 6% due to tough mortgage competition.
👉 What else: Despite the weaker results and a pause in the cash rate yesterday, Westpac is crossing its fingers and toes that loan demand will jump when cash rate cuts hit... some time in the coming months.
💡When the Reserve Bank changes its cash rate, the banks will follow suit…most of the time.
💡The cash rate is the interest rate that banks pay to borrow money from other banks (like how Westpac borrows from the Reserve Bank of Australia). When the cost of borrowing (ie the cash rate) goes up for banks, it gets passed on to consumers. In 2023, the RBA upped the cash rate by 0.25% in Feb, March, May, June, and November, and all four big banks increased their interest rate to borrowers by the same amount, in the same months.
💡But when the cash rate is cut, there’s no guarantee that the banks will mirror its moves. In fact, back in 2020, the RBA dropped the cash rate from 0.5% to 0.1% between March and November, but the average variable rate stayed at 4.52%.
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