In its results for the June quarter, Westpac has reported a statutory net profit of $1.9 billion, representing a 14 per cent increase.
Revenue also increased by 4 per cent, which the major bank said reflected disciplined growth and positive market conditions.
Westpac chief executive officer Anthony Miller said the bank had delivered a sound financial result over the quarter, while executing its strategy and priorities.
“We grew strongly in business and institutional banking, while focusing on returns in consumer and improving customer experience.”
The major bank said a reduction in interest rates and moderation of inflation was expected to underpin a recovery in private sector activity and support further lending growth.
While Westpac reported 1 per cent growth across its home loan books, the June quarter results indicated this growth is primarily driven through broker channels.
Mortgages acquired directly through the bank make up less than half the bank’s total home loan book, with the remaining 64 per cent of home loans coming through the broker channel. Westpac currently has the highest proportion of broker originated loans of all four banks.
Competitor banks such as Commonwealth Bank, on the other hand, have prioritised selling loans directly to customers in order to generate larger profit margins from these loans.
The bank’s net interest margin increased to 1.99 per cent, with core net interest margin on loans up 1 basis point.
Miller said the strong financial foundations of the bank provide it with the “ability and capacity to support its people, customers, shareholders and the broader economy”.
Surge in share prices stretches valuations further
Morningstar analysts previously warned that the share prices for Commonwealth Bank, NAB and Westpac had run ahead of fundamentals.
Last month, the research firm determined that fair value for Westpac was $29 per share, the share price has now jumped to $36.04 as of close of trading on Thursday.
This recent surge in share price means Westpac shares may now be further overvalued.
Commonwealth Bank still remains the most overvalued based on Morningstar's previous analysis last month, despite shares dropping to $167.21 on Thursday.
In its research note last month, Morningstar said it expects credit growth will only reach single digits across the four major banks and that margins will see only a modest improvement.
It is predicting the major banks will deliver a 5 per cent compound profit growth rate for the next five years.
