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Westpac releases strong profit results -

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Westpac releases strong profit results

Reporter: Brigid Glanville

ELEANOR HALL: There was relief from investors and banking analysts today, when Westpac announced a
strong half-year profit result.

There were concerns about just how badly the global credit crunch may have affected the bank.

But the first result unveiled by the bank's new CEO Gail Kelly, showed that Westpac's net profit is
up by 34 per cent to $2.2 billion in the six months to March.

Brigid Glanville joins us now in the studio now to look at Westpac's results.

So Brigid, why hasn't the global credit crisis had more of an impact on Westpac's bottom line?

BRIGID GLANVILLE: Well Eleanor, unlike some of the large banks in the UK and the United States,
Westpac has fared quite well.

The bank says that's because it's tightened its belt, but there's no doubt it has been affected by
the credit crunch.

The strong result of $2.2 billion is very good, but it's not a record profit result, and the areas
where it did do well, it was in their business lending division.

That grew by 18 per cent, helped by an increase in deposit growth of nine per cent. The New Zealand
arm of the bank also performed well, with 10 per cent revenue growth there.

Consumer lending in New Zealand grew by 12 per cent, and business lending was up 14 per cent.

Gail Kelly said this morning that New Zealand has been even less affected by the credit crunch then
Australia has. Adding also to the profit was the US float of credit card giant Visa, went very
well, and the partial float of BT Investment Management all added to Westpac's profit.

And this morning, Gail Kelly had a briefing and this is what she had to say at the analyst's
briefing this morning.

GAIL KELLY: In a nutshell, we've been experiencing higher funding costs, our short-term markets
have repriced and longer-term funds have been both more difficult and more expensive to source.

Lower equity markets have impacted our wealth business, reducing the returns on our funds and our
capital invested.

We've also experienced more volatility, and this has increased market opportunities and allowed us
to better assist customers in managing their financial risks.

These conditions have accelerated the current credit cycle. It's highly likely that these
conditions will continue for the future, into the foreseeable future.

We really should expect the market to return to what was considered normal just 12 months ago.

ELEANOR HALL: That's Gail Kelly, the CEO of Westpac.

Now, Brigid, just this week the bank jacked up interest rates for its mortgage customers, despite
the official rate not rising.

It's now announced a strong profit. That's going to be hard to explain to its customers, isn't it?

BRIGID GLANVILLE: It may seem like cold comfort when they're struggling to pay their mortgage and
the bank's recording a $2.2 billion profit.

But at the end of the day, it is a bank and it's a business, and it's there to make money. However,
Westpac did say that mortgage income was lower, as Westpac has not fully passed on the increase in
funding costs.

Gail Kelly also said that Westpac has a higher proportion of fixed rate lending, which has helped
it weather that storm.

Just interestingly Eleanor, Gail Kelly, who many people will remember is the former CEO of St
George Bank, she's just started at Westpac, so this is her first result.

She said her three month probation period ended on Monday, so they're keeping her, and she did say
in regards to the Australian economy, she said it's strong, but they're cautious, but confident.

She said the higher interest rate environment will contribute to a dampening of economic growth
throughout the rest of 2008, but she reassured everyone that the bank is in good shape.

ELEANOR HALL: Any guarantees she won't be jacking up the interest rates again?

BRIGID GLANVILLE: She didn't go into that, which I'm sure a lot of people would like to know.

ELEANOR HALL: How did the market react to the news of this profit today?

BRIGID GLANVILLE: Just after opening this morning at 10 o'clock, the Westpac result was up one per
cent, but by midday Eastern Standard Time, the result had dropped down 0.8 per cent to $24.47.

ELEANOR HALL: Brigid Glanville, thank you. That's Brigid Glanville who was at the Westpac
announcement this morning.