Westpac Banking Corporation reported a 3% increase in statutory net profit to $1.8 billion in Q3 2026, supported by loan and deposit growth alongside stable capital ratios and ongoing transformation efforts.
- Statutory net profit up 3% to $1.8 billion in Q3 2026
- Common Equity Tier 1 capital ratio steady at 12.1%, above target
- Lending and deposits both grew 2%, with business lending up 4%
- Net interest margin stable at 1.89%, operating expenses up 1%
- Sale of $15.4 billion RAMS mortgage portfolio strengthens balance sheet
Profit Growth Driven by Broad-Based Lending and Deposit Expansion
Westpac Banking Corporation (ASX:WBC) posted an unaudited statutory net profit of $1.8 billion for the third quarter of 2026, marking a 3% increase compared to the first half 2026 quarterly average. Excluding notable items, net profit rose 2%, reflecting steady momentum across its core banking operations. Lending and deposits each expanded by 2%, with business lending notably up 4%, underpinning the bank's growth in a challenging economic environment.
Capital Position Remains Robust Despite Dividend and Asset Sales
The bank’s Common Equity Tier 1 (CET1) capital ratio stood at a healthy 12.1% as of 30 June 2026, comfortably above its target of 11.25%. This slight dip from previous quarters reflects dividend payments and risk-weighted asset growth but was bolstered by the recent sale of the RAMS mortgage portfolio. The $15.4 billion divestment, completed in early August, added 23 basis points to CET1 and reduced operational complexity by trimming the home loan book.
Stable Margins and Controlled Costs Support Earnings
Westpac’s net interest margin (NIM) held steady at 1.89%, with core NIM stable at 1.78%. The bank benefited from higher interest rates and liquid asset yields, offsetting competitive pressures on lending and deposit pricing. Operating expenses rose modestly by 1%, driven by salary increases and ongoing investments, but the bank continues to target over $550 million in productivity savings for the financial year.
Credit Quality Remains Solid Amid Economic Uncertainty
Impairment charges remained low at 10 basis points of average gross loans, with provisions holding steady above expected losses. Stressed exposures in the loan portfolio inched up slightly but remain at low levels overall. Westpac’s diversified loan book showed resilience, with business and institutional lending growing alongside housing credit, which is expected to moderate from 6.8% growth in FY26 to 4.7% in FY27 due to higher interest rates and policy changes.
Customer Initiatives and Technology Transformation Progress
Westpac continued to invest in customer service enhancements, expanding its Spend&Save offer to a broader age range and increasing balance caps to facilitate home ownership. The bank also added 150 regional business bankers, boosting agribusiness growth and customer advocacy. On the technology front, the UNITE transformation program is on track, with commercial banking customer migrations underway and enterprise data successfully moved to the cloud, enabling greater analytics and AI capabilities.
Liquidity and Funding Metrics Remain Strong
Liquidity coverage and net stable funding ratios remained well above regulatory minimums at 134% and 111% respectively. Westpac has issued $38 billion in long-term wholesale funding year to date, maintaining a solid funding profile amid ongoing market volatility.
Bottom Line?
Westpac’s steady profit growth and strong capital position reflect resilience amid a moderating housing market and ongoing transformation, but investors will watch how slowing credit growth and competitive pressures shape future earnings.
Questions in the middle?
- How will Westpac navigate potential margin pressure as housing credit growth slows further?
- What impact will the RAMS mortgage portfolio sale have on future lending volumes and customer retention?
- Can the UNITE transformation deliver the targeted productivity savings without disrupting customer service?