Rising Costs and Competition Test Westpac Despite Strong Profit Surge
Westpac Banking Corporation reported a robust $1.9 billion net profit for 3Q25, driven by growth in business banking and a strong capital position. The bank advances its transformation agenda while enhancing customer security and service.
- 3Q25 net profit up 14% on 1H25 average to $1.9 billion
- Common Equity Tier 1 capital ratio at 12.3%, above target range
- Business and institutional banking show strong growth
- Investment in AI-driven scam detection and new branches
- 71% completion of $3.5 billion share buyback program
Solid Financial Performance
Westpac Banking Corporation has delivered a strong unaudited statutory net profit of $1.9 billion for the third quarter ended June 30, 2025, marking a 14% increase compared to the first half of the year. Excluding notable items, net profit rose 8%, supported by a 4% increase in net interest income and a 6% rise in non-interest income. This performance underscores the bank’s ability to navigate a competitive and evolving financial landscape while maintaining steady revenue growth.
Capital Strength and Risk Management
Westpac’s Common Equity Tier 1 (CET1) capital ratio stood at a robust 12.3%, comfortably above the bank’s target operating range of 11.0% to 11.5%. This capital strength is bolstered by earnings growth and a reduction in interest rate risk-weighted assets. The bank’s liquidity coverage and stable funding ratios remain well above regulatory minimums, reflecting prudent risk management amid ongoing market volatility. Additionally, impairment charges remained low at 5 basis points of average gross loans, indicating improved credit quality across customer segments.
Growth in Business Banking and Customer Initiatives
Westpac’s business and institutional banking segments showed notable growth, with gross loans increasing by $16 billion, including a 5% rise in business loans and 2% growth in institutional lending. Australian housing loan growth was steady at 1%, excluding RAMS. The bank also enhanced customer service by opening new branches in Coomera on the Gold Coast and Darwin’s business banking centre, alongside five additional co-located branches. To bolster customer security, Westpac is piloting AI technology aimed at real-time scam detection, enabling frontline bankers to respond swiftly to potential threats.
Transformation and Strategic Priorities
Westpac continues to advance its transformation agenda through initiatives such as UNITE, BizEdge, and Westpac One, focusing on simplifying operations and accelerating innovation. The UNITE program has been centralized under the Chief Transformation Officer, with additional resources allocated to complete its Discovery phase. The bank also reaffirmed its commitment to supporting Australia’s productivity by engaging with government policy priorities, including increasing housing supply, investing in regional development, and accelerating the energy transition.
Shareholder Returns and Outlook
Westpac has completed 71% of its $3.5 billion on-market share buyback, reflecting confidence in its financial position and future prospects. Operating expenses rose modestly by 3%, driven by wage growth and strategic investments in staff and technology, with ongoing efforts to improve productivity through the Fit for Growth program. Looking ahead, the bank’s strong capital base and operational momentum position it well to support lending growth and navigate evolving economic conditions.
Bottom Line?
Westpac’s strong quarter sets the stage for continued growth, but investors will watch closely how transformation efforts translate into sustained returns.
Questions in the middle?
- How will Westpac’s AI scam detection pilot impact customer trust and fraud losses?
- What are the next milestones and expected benefits from the UNITE transformation program?
- How might evolving economic conditions affect Westpac’s loan growth and credit quality?
