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Shares in Australia's Westpac slump after H1 net profit miss

Shares in Australian banking heavyweight Westpac slumped on Monday after a worse than expected first-half net profit of Aus$3.61 billion (US$2.82 billion), with solid mortgage lending growth offset by its institutional arm taking a hit. The cash profit of Australia's second largest bank, the industry's preferred measure which strips out volatile items, was Aus$3.77 billion in the six months to the end of March. Both sets of numbers were similar to the previous year, with the lack of profit growth sending the stock down as much as 4.9 percent before it recovered to end the day 3.08 percent lower at Aus$35.60. The soft data reverberated onto Australia's other major banks, which all lost ground. ANZ Bank ended down 2.67 percent, National Australia Bank was off 1.41 percent and the nation's biggest company, Commonwealth Bank, fell 1.02 percent. Despite the flat result, Sydney-based Westpac lifted its interim dividend to 93 cents per share. "It's one of the poorest Westpac results I've seen in four or five years," said IG Markets' strategist Evan Lucas, adding that it missed estimates on most key metrics. His IG Markets' colleague Stan Shamu added: "The cash profit was well below consensus while the net income, dividend and net interest margin also disappointed. "Investors have grown quite passive when it comes to the big banks and today's Westpac result will be a rude awakening," said Shamu. "In hindsight, a disappointing round of bank earnings had been well flagged and over the past couple of weeks we had already been seeing some money coming out of the banks." Westpac is the first of the big Australian lenders to release half-year earnings, with ANZ reporting Tuesday and National Australia Bank on Thursday. Commonwealth Bank follows a June year-end compared with September for its three competitors. Westpac chief executive Brian Hartzer, who took over from Gail Kelly in February, said Westpac's retail and business banking divisions performed well. "However, the headline result was impacted by derivative adjustments in our Westpac Institutional Bank business and a lower treasury result," he said. Cash earnings in the institutional arm were down 17 percent, largely due to an Aus$85 million charge relating to derivative valuations. "Our primary goal is to continue to build the value of our franchise, and the drivers of value are heading in the right direction," he added. Hartzer said the bank continued to grow its customer base while also delivering Aus$230 million in efficiency gains and reducing stressed assets. "In our retail and business banking divisions we had solid loan and deposit growth, along with well managed margins," he said. Westpac said its housing loans in Australia were up seven percent while personal lending jumped eight percent and business lending grew five percent. Group-wide, customer deposits increased by Aus$31.4 billion to Aus$420.3 billion, up eight percent.