* Cash profit for 1H21 rose to A$3.5 bln vs A$3.2 forecast
* Books A$37 mln impairment benefit vs A$2.2 bln charge in 1H20
* Australian bank recovery a qtr ahead vs global peers-Citi
* Targets A$8 bln cost base by 2024, smaller head office, branches (Updates share movement)
SYDNEY, May 3 (Reuters) - Westpac first-half cash earnings more than tripled from last year’s plunge, helped by money it had previously set aside to cover potential COVID-19 losses, Australia’s second-largest bank said on Monday, sending shares sharply higher.
The Sydney-based lender also said it will close some branches and accelerate its focus to digital banking under a cost-cutting plan unveiled on Monday that targets a 21% reduction in its cost base.
Helped by money previously set aside to cover potential COVID-19 losses, cash earnings for the six months ended March 31 rose to A$3.54 billion, compared with A$993 million last year, beating market expectations.
Westpac booked a A$372 million impairment benefit over the half, a swift rebound from the whopping A$2.23 billion impairment charge it took in the same period a year earlier.
The result shows Australia’s success in controlling the spread of the coronavirus and how unprecedented monetary and fiscal stimulus have helped Westpac and other banks start winding back conservative loss estimates, boosting earnings.
“The Aussie banks have come out of the health crisis a bit earlier than some of the northern hemisphere developed market banks, who are still suffering lockdowns in their economies,” Citigroup banking analyst Brendan Sproules said.
“The trends are very similar, but we are about a quarter ahead of the UK banks (and) the profitability of the Australian banks still seems to be at higher levels than European counterparts.”
Westpac shares rose as much as 5.4%, outperforming the broader market that was 0.07% higher.
Data on Monday showed Australian home prices posted another solid increase in April, while job advertisements climbed to their highest level since 2008 and up almost 200% on a year earlier when a pandemic lockdown shut many industries.
Westpac also declared an interim dividend of 58 cents per share, after not paying one last year as its profit dived due to the writedowns and provisions to account for the uncertainty and economic deterioration arising from the pandemic.
LESS BRANCHES, LOWER COSTS
Westpac, which has lagged its peers due to complex and inefficient systems, said it plans to reduce “in-branch” transactions by 40% and bring costs down to A$8 billion a year by fiscal 2024, from A$10.1 billion in fiscal 2020.
Declining to spell out how many branches it would close, Westpac said it would “rationalise” duplicate branches, have smaller customised ones and shrink its corporate headquarters.
“This is a big change for Westpac, as we have not historically set absolute targets,” Chief Executive Officer Peter King told an investor call.
Aging software and convoluted procedures have been Westpac’s main enemy, leading to record fines due to breaches of anti-money laundering law and market share losses in mortgages, its main product.
Westpac is also selling non-core assets as part of efforts to simplify its business, which would cut about A$750 million off its cost base.
Westpac said costs will initially increase this fiscal year as it sells non-core businesses and beefs up its digital offering, before starting to fall from fiscal 2022.
Hugh Dive, chief investment officer at Atlas Funds Management, said that while the bank didn’t explicitly say how many branches it would cull, sharply reducing its 889-strong branch network to take out about A$1 billion in costs was a logical move, and would be a difficult task.
$1 = 1.2960 Australian dollars Reporting by Paulina Duran in Sydney, and Rashmi Ashok and Nikhil Kurian Nainan in Bengaluru; Editing by Diane Craft, Peter Cooney, Jane Wardell and Raju Gopalakrishnan