Westpac Banking Corporation's 8% lift in first-half cash profit has beaten analyst expectations as chief executive Gail Kelly says the strength of the housing market and resurgent business confidence are poised to fuel further improvements in the local economy.
In the six months to March 31, Westpac posted a cash profit of $3.77 billion, above both the previous corresponding period's result of $3.51bn and the median analyst expectation of $3.64bn.
The lender's net profit attributable to members totaled $3.62bn, a 10% increase on the $3.29bn recorded in the previous corresponding period.
Revenue from ordinary activities in the first half came to $9.79bn, a 7% increase on the $9.17bn posted in the first half of 2013.
Westpac will pay a fully-franked interim dividend of 90c per security to shareholders on the register at May 16.
Kelly upbeat on business confidence
Westpac chief executive Gail Kelly said Australian households remained cautious, but noted the pace of their spending growth has lifted somewhat and confidence has trended higher.
Mrs Kelly also noted that housing markets have responded well to low interest rates and housing construction is likely to provide a boost to economic activity over the next few years.
"We have recently seen signs of increased customer activity and expect the economy to gradually improve throughout the remainder of 2014," Mrs Kelly said.
Looking outside Australia, Mrs Kelly said the world economy had improved, with Europe pulling out of recession and the United States slowly moving towards trend growth.
However she warned a deceleration in growth in China was partly offsetting the more positive global developments. She said Westpac still expects China's growth rate to settle comfortably above 7%.
Mrs Kelly also delivered an upbeat assessment of the business sector, noting while the slowdown in mining investment is well underway, business confidence and conditions outside the mining sector appear to have passed the lows in the investment and borrowing cycles.
"On these trends, it is reasonable to expect a sustained, albeit modest, lift in business activity over the course of the remainder of this year and next year," she said.
On Westpac itself, Mrs Kelly said she was optimistic about the second half, and she expects the bank's focus on tilting to growth will continue to deliver in the rest of the year.
"We also expect to see further benefits from our simplification and productivity programs," she said.