Westpac has downplayed the prospect of regulators stepping in to curb the boom in house prices and promised to slash $2 billion from its cost base within the next few years to become a leaner bank.
A rapidly rebounding economy, with consumer sentiment at a decade-high and a drop in soured loans, enabled the bank to more than treble its half- year cash profit from $993 million to $3.5 billion.
Westpac chief executive Peter King has maintained his forecast that residential property prices will rise 20% by the end of next year, although most of the increase will now be front-ended into 2021 before housing supply constraints ease next year.
He contrasted the current boom to previous cycles, saying the riskier interest-only segment was much lower this time.
“Last time, there was more investor activity, high LVRs and more interest-only lending,” he says. “It’s not happening this time.”
The Australian Prudential Regulation Authority has no mandate to contain growth in house prices, but might to intervene if lending standards deteriorate, King says.