Wellington, Feb 18 NZPA - Australian bank Westpac says it is encountering further stress in its New Zealand business.

The statement was made as part of an update to the Australian market in which Westpac forecast a $A1.2 ($NZ1.52) billion profit in the three months to December 31, down 2 percent on last year.

The statement shows a steep increase in the number of New Zealanders with mortgages 90 days or more in arrears.

At the end of December, 0.66 of a percent of Westpac's New Zealand mortgage book had payments 90 days or more in arrears. At less than 1 percent this is still historically low but a rise of 0.19 percentage points in three months is steep.

In Australia the figure for mortgages in arrears at the end of December is 0.43 of a percent and in the US figures are much higher at 7 percent to 8 percent of the mortgage book.

"They are still relatively low numbers but the thing is the trend," said Westpac NZ's acting chief executive Bruce McLachlan.

It is unusual for banks to release an update before a profit report.

The update revealed Westpac's impaired loans rose by $A930m in the three months ended December 31.

Of this total 78 percent was for corporate loans and 9 percent was for mortgages. The bank said most of the increase in impaired mortgage loans was from New Zealand.

Mr McLachlan could not give a profit forecast for New Zealand.

Westpac's New Zealand operation reported a 6 percent rise in full year net profit to $484 million last year.

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