Westpac Banking Corporation posted a statutory net profit of AUD 3.414 billion for the half year ended March 2026, marking a 3% increase on the prior corresponding period despite a 5% decline from the previous half. The bank maintained a strong capital position and declared a fully franked interim dividend of 77 cents per share.
- Statutory net profit up 3% year-on-year
- Net interest income rose 4% year-on-year but fell 3% half-on-half
- Credit impairment charges increased to 10 basis points of average loans
- CET1 capital ratio at 12.42%, above 11.25% target
- Fully franked interim dividend of 77 cents declared
Profit and Margin Dynamics Amid Global Uncertainty
Westpac Banking Corporation (ASX:WBC) delivered a statutory net profit of AUD 3.414 billion for the six months ended 31 March 2026, up 3% on the first half of 2025 but down 5% on the immediately preceding half. The net profit excluding Notable Items, a measure Westpac uses to reflect underlying performance, was AUD 3.483 billion, down 1% half-on-half and up 1% year-on-year.
Net interest income rose 4% year-on-year, supported by a 7% growth in lending balances, notably Australian business lending which increased 16%. However, it contracted 3% half-on-half due to a 9 basis point decline in net interest margin (NIM), which narrowed to 1.89%. This margin compression was driven by competitive lending spreads, timing differences related to interest rate changes, and weaker Treasury income. Core NIM, excluding Treasury and Markets, fell 4 basis points to 1.78%.
Non-interest income increased 6% year-on-year but fell 3% half-on-half, reflecting lower fee income and Markets revenue. Operating expenses decreased 5% half-on-half to AUD 5.937 billion, aided by productivity initiatives and a simpler operating model, including the impact of the prior half’s restructuring charge. The expense to income ratio improved to 51.7% excluding Notable Items.
Credit Quality and Provisions Reflect Economic Outlook
Credit impairment charges rose significantly to 10 basis points of average loans, up from 6 basis points in the prior corresponding period, driven by a revised economic outlook and a new portfolio overlay for energy-intensive sectors. Total provisions for expected credit losses increased to AUD 5.2 billion, representing 1.29% of credit risk weighted assets. Despite this, stressed exposures as a percentage of total committed exposures (TCE) improved to 1.16%, down 12 basis points from September 2025.
Within the portfolio, Australian mortgage 90+ day delinquencies declined 8 basis points to 0.65%, while other consumer loan delinquencies also improved. Business & Wealth segment saw a 43 basis point reduction in stressed exposures, reflecting improved conditions in property and trade sectors.
Capital Position and Dividend
Westpac’s Common Equity Tier 1 (CET1) capital ratio stood at a robust 12.42%, comfortably above the target ratio of 11.25% in normal operating conditions. The bank holds approximately AUD 2.7 billion in surplus capital after the payment of the interim dividend. The CET1 ratio declined 11 basis points in the half due to dividend payments and higher risk weighted assets.
The Board declared a fully franked interim dividend of 77 cents per share, consistent with the prior half, representing a payout ratio of 77.1% on statutory net profit and 75.6% excluding Notable Items. The dividend will be paid on 26 June 2026, with a record date of 11 May. The Dividend Reinvestment Plan (DRP) will operate fully with shares purchased on market to satisfy entitlements.
Strategic Execution and Customer Focus
CEO Anthony Miller highlighted solid operating momentum despite global unrest, noting Westpac’s disciplined approach to supporting customers amid geopolitical and economic challenges. Mortgages grew at 1.2 times system excluding RAMS, with an increased share of proprietary lending. The bank is investing in regional Australia, opening new service centres and extending its moratorium on regional branch closures to 2030.
The UNITE transformation program remains a key focus, with the first large-scale migration completed in March 2026, consolidating wealth platforms onto BT Panorama and progressing towards a unified commercial bank. Westpac continues to invest in digital solutions, AI adoption, and sustainability initiatives, including a 10% increase in sustainable finance lending to AUD 43.3 billion and expanded partnerships for climate-resilient home upgrades.
Westpac’s investment in fraud and scam prevention has contributed to averting AUD 181 million in potential customer losses in the half, supported by AI tools and enhanced digital security features.
Regulatory and Economic Environment
The ongoing conflict in the Middle East has introduced inflationary pressures and supply chain disruptions, impacting energy prices and household costs. Westpac is prepared to collaborate with government efforts to enhance national resilience, including investments in sustainable energy systems and advocating for productivity-boosting reforms.
Regulatory changes remain a focus, with Westpac advancing compliance with the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 and adapting to APRA’s forthcoming capital framework reforms, including the phase-out of Additional Tier 1 capital instruments.
Westpac’s New Zealand operations faced margin pressure from a lower interest rate environment, with net profit down 19% to NZD 545 million, reflecting higher technology and staff costs offset by productivity gains.
Investors will note the bank’s ongoing share buyback program, with AUD 2.5 billion completed of a AUD 3.5 billion target, and a total shareholder return of 31% for the year to 31 March 2026, the highest among major Australian banks.
These results build on steady lending and deposit growth alongside stable margins despite geopolitical headwinds, while transaction costs from its RAMS mortgage portfolio sale weigh on first-half profits, as detailed in Westpac’s recent steady lending and deposit growth.
Bottom Line?
Westpac’s solid first-half performance balances growth and risk amid geopolitical uncertainty, but the evolving regulatory landscape and UNITE transformation execution will be critical to watch.
Questions in the middle?
- How will Westpac’s UNITE program progress impact operational efficiency and customer experience in the coming halves?
- What are the potential implications of rising credit impairment provisions on Westpac’s future profitability?
- How might ongoing geopolitical tensions and energy price volatility affect Westpac’s lending and risk profile?