Westpac Banking Corp, one of Australia’s major banks, has announced that it will no longer be pursuing its cost-cutting target due to inflationary pressures and has warned of a potential squeeze on profit margins in the future. CEO Peter King cited rising overheads as a result of inflation and noted that the bank would be raising its wages by 4%, exceeding the inflation rate of under 3%.
Additionally, Westpac warned that its net interest margins (NIMs) may decrease as interest rate cycles approach their peak, similar to local rivals ANZ Group and National Australia Bank as well as Singapore’s DBS Group. Despite this, Westpac has reported a 22% increase in income for the first half of the year, beating expectations with a profit of AUD 4 billion ($2.7 billion).
The bank’s shares closed 2% higher following the announcement. Westpac plans to redirect its resources to institutional banking and financing the transition from fossil fuels to renewable energy, without providing specifics.