Westpac’s Profit Dips 1% Amid Rising Costs and Global Risks

• Net profit after tax declined 1% to $3.3 billion
• Australian business lending up 14%, institutional lending up 15%
• Core net interest margin stable at 1.80%
• Operating expenses rose 6% due to technology and staffing investments
• Interim dividend maintained at 76 cents per share

Steady Profit Performance Amid Global Challenges

Westpac Banking Corporation reported a net profit after tax of $3.3 billion for the half year ending March 2025, marking a modest 1% decline compared to the same period last year. Despite this slight dip, the bank’s core net interest margin (NIM) held steady at 1.80%, reflecting disciplined margin management in a highly competitive lending environment.

Chief Executive Officer Anthony Miller highlighted the bank’s resilience, noting that "this result confirms Westpac’s strong position" and praised the team’s focus on strategic priorities amid ongoing global uncertainty. The bank’s capital position remains robust with a Common Equity Tier 1 (CET1) ratio of 12.2%, providing a solid buffer to support customers and absorb potential shocks.

Strong Lending Growth Drives Momentum

Westpac’s growth story is anchored in its targeted lending segments. Australian business lending surged 14% year-on-year, while institutional lending expanded by 15%. This growth outpaces system averages and underscores the bank’s commitment to supporting the business sector, which remains a key driver of the Australian economy.

Housing loans also grew by 5%, albeit at a more moderate pace, reflecting cautious consumer sentiment amid cost-of-living pressures and interest rate volatility. Customer deposits increased 7%, with household deposits up 9%, reinforcing the bank’s stable funding base.

Investing in Technology and Customer Experience

Operating expenses rose 6% to $5.7 billion, driven by investments in the UNITE program, third-party technology, software amortisation, and increased staffing, including more bankers. These investments aim to enhance operational efficiency and customer service, with initiatives like the award-winning Westpac app, scam-prevention technology, and new platforms such as Westpac One and BizEdge.

Westpac is also expanding its physical footprint in regional Australia, announcing new service centres in Moree, Leongatha, and Smithton. This move reflects a strategic balance between digital innovation and maintaining accessible, local customer service.

Credit Quality and Dividend Stability

Credit impairment charges improved, falling to 6 basis points of average loans from 9 basis points, indicating better-than-expected credit quality. Mortgage delinquencies remain low, and business stress levels are contained, suggesting the bank may have passed the low point in the credit cycle.

Westpac maintained its interim dividend at 76 cents per share, reflecting confidence in its earnings stability and capital strength. The payout ratio stands at 75%, balancing shareholder returns with prudent capital management.

Looking Ahead

While geopolitical tensions and global trade uncertainties continue to pose risks, Westpac’s leadership remains focused on sustainable growth, cost discipline, and customer service excellence. The bank’s strong balance sheet and strategic investments position it well to navigate the evolving economic landscape and capitalize on emerging opportunities.

Bottom Line?

Westpac’s half-year results underscore resilience and strategic focus, but global uncertainties warrant close investor attention.

Questions in the middle?

• How will Westpac’s UNITE program impact cost efficiency and profitability in the next 12 months?
• What are the potential effects of geopolitical risks on Westpac’s funding and lending outlook?
• How will the expansion into regional service centres influence customer acquisition and retention?