* Annual cash profit unchanged at A$7.82 bln
* Return on equity falls to 14 pct from 15.8 pct
* New return on equity target of 13-14 pct (Recasts, updates with fresh CEO and analyst comments)
By Jamie Freed
SYDNEY, Nov 7 (Reuters) - Westpac on Monday said it would abandon a longstanding target of a 15 percent return on equity (ROE) after reporting the lowest ROE since the height of the financial crisis in 2009 due higher capital requirements and lower interest rates.
Australian bank returns have been under pressure from higher wholesale funding and deposit costs, as well as regulatory changes requiring them to hold more capital against their mortgage books to provide a more level playing field for smaller rivals.
Westpac said ROE had fallen to 14 percent from 15.8 percent a year earlier after it reported an unchanged cash profit of A$7.82 billion ($6 billion) for the year ended Sept. 30, in line with analysts' expectations.
In the latest sign that Australia's highly profitable major banks had entered a phase of lower growth, Westpac Chief Executive Officer Brian Hartzer said the old 15 percent ROE target, set by his predecessor Gail Kelly in 2012, was no longer achievable.
"While we might aspire to a higher level of ROE over the longer term a target of 13-14 percent is more realistic for the medium term," Hartzer told analysts.
In addition to low interest rates and higher capital requirements, he pointed to a rise in compliance costs across the sector after scandals involving misleading financial advice, insurance fraud and alleged interest-rate rigging.
Westpac reported a ROE of 13.8 percent at the height of the global financial crisis in 2009.
Omkar Joshi, an investment analyst at Watermark Funds Management, said the new target could "prove to be too optimistic" if regulators tightened capital requirements further.
Westpac issued A$3.5 billion of new shares in October 2015 and on Monday announced a dividend reinvestment plan after issuing a final, fully-franked dividend of $A0.94 per share, the same as the previous year. The dividend was flat for the third half-year period in a row.
Westpac shares were 2.7 percent higher in morning trade, outperforming a 0.9 percent rise in the broader market, as investors drew comfort from the decision to keep the dividend steady.
Westpac said there had been a small rise in consumer and business delinquencies over the last year that suggested the asset quality cycle had turned negative.
Impairment charges rose by 49 percent to A$1.124 billion compared with the prior year, although A$231 million of the rise was attributed to exposure to a select group of institutional clients.
Westpac is the last of the big banks reporting results for the year ended Sept. 30. Rival National Australia Bank (NAB) posted a 2 percent rise in cash earnings, while ANZ reported an 18 percent decline.
$1 = 1.3011 Australian dollars Reporting by Jamie Freed; Editing by Stephen Coates