Westpac Faces Rising Costs and Regulatory Changes Despite Solid FY25 Profit
Westpac Banking Corporation reported a solid $6.9 billion net profit for FY25, underpinned by strong deposit growth and ongoing digital transformation, while advancing ambitious sustainability targets.
- Net profit of $6.9 billion, down 1% from FY24
- Deposit growth of 7% to $723 billion and loan growth of 6% to $856 billion
- CET1 capital ratio steady at 12.53%, above regulatory minimums
- UNITE digital transformation program progressing with $660 million invested in FY25
- Sustainability commitments include significant emissions reductions and $55 billion sustainable lending target by 2030
Financial Performance and Capital Strength
Westpac Banking Corporation closed its 2025 financial year with a net profit of $6.9 billion, a slight 1% decline compared to the previous year. Despite this modest dip, the bank demonstrated robust growth in key balance sheet metrics, with customer deposits rising 7% to $723 billion and loans growing 6% to $856 billion. The Common Equity Tier 1 (CET1) capital ratio remained strong at 12.53%, comfortably above APRA’s regulatory requirements, reflecting prudent capital management amid evolving regulatory changes.
Digital Transformation – The UNITE Program
Westpac’s ongoing digital transformation, anchored by the UNITE program, remains a central pillar of its strategy. The bank invested $660 million in FY25 towards UNITE, focusing on streamlining customer experience and operational efficiency. Key milestones include consolidating chat platforms, migrating thousands of bankers onto new digital tools, and launching the Westpac One platform to enhance transaction banking capabilities. These initiatives have contributed to improved customer service metrics and operational cost savings, positioning Westpac competitively in a rapidly digitising banking landscape.
Credit Quality and Risk Management
Credit quality metrics remained stable, with low impairment charges and a reduction in stressed exposures. Mortgage delinquencies, particularly those over 90 days, decreased, reflecting cautious underwriting and improving economic conditions. The bank’s diversified loan portfolio, spanning consumer, business, and institutional segments, continues to be managed with a focus on risk mitigation and sectoral exposures, notably in commercial property and construction.
Sustainability and Community Commitments
Westpac reinforced its commitment to sustainability, reporting significant progress towards its 2030 targets. The bank achieved a 76% reduction in scope 1 and 2 emissions from its 2021 baseline and is on track to meet its upstream scope 3 emissions reduction goals. Sustainable finance lending reached $39.4 billion, with a cumulative $22.3 billion in sustainable bond facilitation. Westpac also highlighted its community investments, including scholarships, volunteer hours, and support for diverse suppliers, underscoring its broader social impact ambitions.
Customer Experience and Fraud Prevention
Customer service improvements were evident, with Westpac’s mobile banking app retaining its #1 ranking in Australia for the third consecutive year. The bank enhanced its fraud prevention capabilities through AI-driven tools like the JESS AI assistant and launched new features such as SafeBlock and SafeCall, which collectively helped prevent over $360 million in potential scam losses. Digital adoption continues to rise, with daily logins and digital transactions increasing, reflecting strong customer engagement with Westpac’s digital platforms.
Bottom Line?
Westpac’s FY25 results underscore a bank balancing steady financial performance with transformative digital and sustainability initiatives, setting the stage for future growth amid regulatory and economic shifts.
Questions in the middle?
- How will Westpac manage rising UNITE program costs while maintaining profitability?
- What impact will APRA’s phase-out of Additional Tier 1 capital have on Westpac’s capital strategy?
- Can Westpac sustain deposit and loan growth amid evolving economic conditions and competitive pressures?
