Westpac expects lower profit

Press, 12 January 1987, Page 27

Westpac expects lower profit

PA Sydney Westpac Banking Corporation’s 1986/87 net operating profit would be affected by slower interest income growth and new tax imposts, the company’s managing director, Mr Bob White, announced. Mr White made the forecasts in the bank’s annual report released in Sydney, saying that slowing economic conditions in Australia and New Zealand and relatively low levels of capital investment expenditure had affected demand for funds. As well, he said, increasing competition between financial institutions had reduced the interest rate margin of Westpac’s trading bank by about ten per cent during the past two years.

Mr White said Westpac’s results would also be affected by a “disturbing burden” of taxation in the year ahead, particularly with the imposition of the Australian fringe benefits tax and with the rise in the company tax rate to 49 per cent from 46 per cent, which took effect generally in July. Westpac’s chairman, Sir Noel Foley, also foreshadowed a depressed year, saying the banking industry in Australia could look forward to a continuation of burdensome conditions. Sir Noel said many other countries in which Westpac operated also faced subdued growth, while, locally, economic management would continue to be dominated by

considerations about Australia’s current account deficit For the first five months of the 1986/87 fiscal year Australia’s current account deficit was sAust6.s billion compared with $6.3 billion for the corresponding period the previous year. Sir Noel said despite the boost to the export sector flowing from the depreciation of the Australian dollar last year, an early reduction in Australia’s current account deficit was not in sight “Many of the commodities, both rural and mining, upon which Australia depends for 80 per cent of its export income, are plagued by either shrinking world demand or falling prices,” he said.