Westpac’s 2025: $6.9bn Profit, 7% Deposit Growth, and 12.5% CET1 Ratio

Financial Performance and Dividend Strength

Westpac Banking Corporation has delivered a statutory net profit of $6.9 billion for the full year ended September 2025, reflecting a modest 2% decline on a net profit basis excluding notable items. Despite this slight dip, the bank demonstrated resilience through disciplined management of its net interest margins and balance sheet growth. Operating income rose, driven by expansion in lending and fee income, while credit impairment charges improved, underscoring enhanced credit quality across segments.

The bank’s capital position remains robust, with a Common Equity Tier 1 (CET1) capital ratio of 12.5%, comfortably above the regulatory minimum and the bank’s internal target. This strong capital base supports Westpac’s increased fully franked ordinary dividend of 153 cents per share, reflecting a payout ratio near the upper end of its preferred range at 76%. The dividend policy signals confidence in sustainable earnings and shareholder returns.

Balance Sheet Growth and Credit Quality

Westpac’s balance sheet showed solid momentum with customer deposits growing 7% to $723 billion and loans increasing 6% to $852 billion. Notably, business lending surged 15%, and institutional lending expanded 17%, driven by targeted sectors such as agriculture, health, infrastructure, and energy. Consumer deposits also grew strongly, particularly in savings accounts and mortgage offset balances, reflecting customer preference shifts amid a changing interest rate environment.

Credit quality metrics improved significantly, with credit impairment charges declining to 5 basis points of average loans from 7 basis points the previous year. Stressed exposures fell, supported by easing cost of living pressures and improved economic conditions in Australia and New Zealand. The bank remains well provisioned with total provisions of nearly $5 billion, balancing modelled provisions and overlays to address emerging risks.

Operating Expenses and Strategic Investments

Operating expenses increased 9% to $11.9 billion, reflecting inflationary pressures, higher staff costs, and a significant $273 million restructuring charge under the Fit for Growth program aimed at boosting productivity. Investment in the UNITE transformation program also stepped up, focusing on simplifying legacy systems and improving customer experience. Despite higher expenses, Westpac is targeting cost discipline and efficiency gains to narrow its cost-to-income ratio gap relative to peers.

Key technology and digital initiatives include consolidating banking platforms, enhancing onboarding processes, and deploying AI-driven solutions to streamline workflows. These efforts are designed to strengthen Westpac’s competitive positioning and support long-term sustainable growth.

Outlook Amid Economic and Geopolitical Challenges

Westpac’s outlook reflects cautious optimism. The Australian economy is expected to accelerate modestly, with GDP growth forecast to rise to 2.1% in 2025 and 2.4% in 2026, supported by a gradual recovery in private sector activity. Housing credit growth is anticipated to remain strong, underpinned by structural supply constraints. Business credit demand is also expected to grow robustly, although the recovery remains uneven across sectors.

New Zealand’s economic recovery is slower, constrained by global trade uncertainties and elevated living costs, but lower interest rates are expected to support housing demand. Globally, inflation is stabilizing, allowing for gradual monetary easing, though geopolitical tensions and trade risks persist, potentially impacting sentiment and investment.

Westpac’s strategic priorities emphasize customer experience excellence, risk management, and transformation through UNITE and Fit for Growth. The bank aims to leverage these initiatives to deliver sustainable returns and maintain its market leadership.