Westpac Banking Corp (ASX: WBC) just reported its annual profit result for 2018 (FY18), here’s what you need to know.

Westpac Banking Corp is one of the largest banks in Australia along with Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).

Westpac’s FY18 result

The bank revealed that its cash earnings was flat at $8 billion whilst its statutory net profit grew by 1% to $8.1 billion. However, cash earnings per share fell 1% to 236.2 cents due to there being more shares issued.

Westpac’s CEO Brian Hartzer said:

In a difficult year, Westpac delivered a flat financial result. While the economic environment remains supportive, this result reflects the tough operating conditions for banks, with higher regulatory, compliance and funding costs, and increased competitive pressure particularly in the second half.”

The closely-watched final dividend was maintained at $0.94, meaning full year dividends were held at $1.88. The final dividend will be fully franked (click here to learn what franking credits are).

Reduction in interest-only lending

At March 2017 around 50% of Westpac’s loans were interest-only. By September 2018 this was only 35%, the bank noted, with only 19% of new flow being interest only in the second half of FY18.

Over the next 18 months, Westpac said there will be approximately $51 billion worth of loans switching to principal & interest repayments.

Rising mortgage delinquencies 

Just like Commonwealth Bank’s recent financial report, Westpac reported that its 90+ day delinquencies are rising. At September 2017, 0.67% of Australian mortgages were behind after 90+ days. At March 2018, it rose to 0.69% and in September 2018 it was 0.72%.

Bank levy and Royal Commission bite

The recently-introduced bank levy cost Westpac $378 million in FY18 after being in place for a full year for the first time.

Meanwhile, the effects of remediation due to findings in the Royal Commission hit Westpac to the tune of $281 million.

CEO Hartzer added: “While we have more work to do, we are dealing decisively with known issues.”

The Westpac share price is down nearly 20% over the past year.

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