Australia’s Westpac begins to bleed

One of Australia’s most stable banks is cut by the banking crisis.

Westpac Banking Corporation or Westpac, one of Australia’s "Big Four" banks and the second largest bank in asset size, has reported a first-quarter cash profit of US$1.6 billion, 5% lower than the previous quarter.

The dismaying result reflects the contrary operating conditions ignited by the European debt crisis that Westpac has had to contend with. A US$213 million decline in market income was only partially offset by asset sales and establishment fees.

Australian banks rely heavily on offshore debt markets to fund loans, and Europe's lingering problems are making those markets more expensive and harder to access.

"Operating conditions deteriorated in the December 2011 quarter with slowing global growth and an escalation in the European sovereign debt crisis leading to high market volatility and increased business and consumer caution," the bank said.

"More recently, events to shore up liquidity in Europe have assisted in improving market sentiment, although given the fundamental issues in that region, we remain cautious about the outlook."

Westpac recently announced plans to cut over 400 jobs and transfer some 150 jobs offshore in a bid to offset rising costs.

Westpac has over 12 million customers and is Australia's second-largest provider of home lending and the second-largest business banking lender.