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By Paulina Duran

© Reuters/DAVID GRAY FILE PHOTO: A pedestrian looks at his phone as he walks past a logo for Australia’s Westpac Banking Corp located outside a branch in central Sydney

SYDNEY (Reuters) – Westpac Banking Corp on Wednesday reported a rebound in first-quarter profit, benefiting from a reversal in bad debt charges as the Australian economy and the housing market recover from the COVID-19 pandemic.

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Australia’s success in containing the pandemic, supported by unprecedented amounts of monetary and fiscal support, has helped the country’s banks overcome bad debt provision charges and near-zero interest rates.

Cash profit for the three months to Dec. 31 stood at A$1.97 billion ($1.53 billion), 16% higher than the A$1.70 billion profit of a year earlier.

The quarterly result was also more than double the quarterly average of A$808 million in the second half of fiscal 2020, the lender said, boosted by a A$501 million impairment benefit due to a better-than-expected outlook.

“The economy is recovering, consumer and business confidence is strong, and the labour market has been much more resilient than expected,” said Chief Executive Officer Peter King.

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“While uncertainty remains around the impact of local COVID outbreaks, there is cause for optimism.”

Core earnings at the Sydney-based bank were up 28%, driven by higher revenues and improving margins, it said, as the resurgent housing market drives a rebound in home loan sales.

The “strong” result would likely see the market react positively, Credit Suisse analysts said.

The lender said, however, that the good quarter result was unlikely to be replicated through the rest of the year, because “margins remain under pressure and investment spending is likely to increase through 2021.”

Australia’s third-largest bank said its total stressed asset exposure fell 15 basis points to 1.76% in the quarter, while assets on its watchlist fell to 0.8%.

($1 = 1.2887 Australian dollars)

(Reporting by Paulina Duran in Sydney and Nikhil Kurian Nainan in Bengaluru; Editing by Maju Samuel, Shailesh Kuber and Sonya Hepinstall)