Westpac Banking Corporation reported a steady net profit of AUD 1.9 billion for the first quarter of 2026, underpinned by stable margins and robust capital ratios. The bank’s credit quality and funding position remain resilient amid a cautious economic outlook.
- Net profit excluding notable items steady at $1.9 billion
- Net interest margin stable at 1.94%
- Level 2 CET1 capital ratio holds firm at 12.3%
- Credit quality metrics show stable impairment charges
- Liquidity coverage ratio around 84%, net stable funding ratio above 110%
Steady Profit Performance Amid Economic Uncertainty
Westpac Banking Corporation has released its First Quarter 2026 Investor Discussion Pack, revealing a net profit excluding notable items of AUD 1.9 billion for the three months ended 31 December 2025. This result marks a modest improvement over the second half of 2025, reflecting a resilient operating environment despite ongoing economic headwinds.
The bank’s net interest margin (NIM) remained stable at 1.94%, a slight uptick from the previous quarter, supported by a solid core margin and contributions from treasury and markets activities. Net operating income edged higher to AUD 5.8 billion, while operating expenses were reduced by 5%, driving a 7% increase in pre-provision profit.
Capital Strength and Risk-Weighted Assets
Westpac’s capital position remains robust, with a Level 2 Common Equity Tier 1 (CET1) capital ratio of 12.3%, marginally down from 12.5% in September 2025 but well above regulatory minimums. The bank’s total regulatory capital ratio held steady at 21.6%, reflecting prudent capital management including a share buyback program that modestly impacted capital ratios.
Risk-weighted assets (RWA) increased by 0.5% to AUD 452.4 billion, driven primarily by credit risk adjustments. The bank’s capital movements were influenced by standard regulatory changes, embedded losses, and the removal of an operational risk overlay, balancing out various capital deductions.
Credit Quality and Provisioning
Credit quality metrics indicate stable impairment charges, with provisions for expected credit losses (ECL) maintained at prudent levels. Total provisions stood at AUD 2.1 billion above the base case forecast, reflecting cautious economic scenario planning amid forecasts of modest GDP growth and potential property price declines.
Mortgage delinquencies and hardship balances in Australia and New Zealand remained low and stable, with 90+ day delinquencies in Australian mortgages at 0.55%. The bank’s mortgage portfolio composition shows a balanced mix of owner-occupied and investment property loans, with a strong proportion of customers ahead on repayments and healthy repayment buffers.
Funding and Liquidity Remain Robust
Westpac’s liquidity coverage ratio (LCR) averaged around 84% for the quarter, reflecting a slight decrease in average liquid assets but remaining comfortably above regulatory requirements. The net stable funding ratio (NSFR) increased slightly due to loan growth, standing above 110%, underscoring the bank’s strong funding profile.
The bank’s term debt issuance and maturity profile show a well-staggered schedule, with $18.1 billion issued year-to-date and manageable maturities ahead. This prudent approach supports ongoing liquidity and capital stability.
Looking Ahead
Westpac’s forward-looking statements highlight ongoing vigilance around economic uncertainties, including potential impacts on credit risk and capital adequacy. The bank’s comprehensive risk management framework and capital buffers position it well to navigate evolving market conditions.
Bottom Line?
Westpac’s steady first quarter results reinforce its resilience, but investors will watch closely for how economic shifts influence credit risk and capital in coming quarters.
Questions in the middle?
- How will Westpac’s credit quality evolve if economic conditions worsen?
- What impact will rising interest rates have on Westpac’s net interest margin going forward?
- Could upcoming regulatory changes affect Westpac’s capital ratios or dividend policy?