Westpac Banking Corporation

Westpac reported net profit excluding notable items up 5% versus the second-half FY25 average. Revenue rose 1%, driven by a 2% increase in net interest income and partly offset by a 4% decline in noninterest income due to lower markets revenue from unfavorable DVA. Operating expenses excluding the second-half FY25 restructuring charge were stable at $3 billion; including that charge, expenses were 5% lower. Pre-provision profit increased 6% (or 2% excluding restructuring). Net interest margin decreased 1 basis point to 1.94%, while core NIM of 1.79% declined 3 basis points versus second half FY25 and 1 basis point quarter on quarter. Deposits grew $12 billion, loans grew $22 billion, and CET1 ended at 12.3%. Looking ahead, Westpac expects deposit growth to remain strong through FY26, expects institutional lending growth to moderate over the rest of FY26, expects the RAMS transaction to settle by mid-year with an expected $16 billion reduction in mortgages, expects a net replicating portfolio benefit of about 1 basis point in the first half, and said the recent RBA rate rise will be a slight headwind in Q2 due to timing of customer pass-through.

Nathan Goonan framed the quarter as disciplined execution against Westpac’s five strategic priorities, emphasizing operational momentum, deeper customer relationships, and continued investment in the business. He said the bank is optimistic on the economy and expects demand for business and household credit to remain resilient. His tone was measured but constructive, with repeated emphasis on stability, medium-term earnings predictability, and steady progress rather than a sharp near-term inflection.

Goonan highlighted the main financial drivers: revenue up 1%, NII up 2%, noninterest income down 4%, expenses stable at $3 billion excluding restructuring, and pre-provision profit up 6%. He also pointed to a 1 bp NIM decline to 1.94%, a stronger Treasury contribution of 15 bps versus 13 bps, a $15 billion increase in the deposit hedge to $92 billion, and CET1 at 12.3% after dividend payment and several one-off movements. On capital, he said the quarter included $2.3 billion of risk-weight optimization, around $3 billion of RWA benefit from better credit quality, and that a full-year optimization run rate of $10 billion is unlikely to repeat; he suggested $7 billion to $8 billion would be a good outcome.

Analysts focused on the departures of senior IT leaders and whether that could affect the UNITE transformation program, and management said there is no material impact, with a dedicated CIO and Peter Herbert still running the program and a fuller update due on 26 March. Questions also centered on the increased deposit hedge, NIM pressure from mix shifts and rate timing, the rise in proprietary mortgage flow versus the declining stock share, Treasury’s unusually strong contribution, and capital returns. Management said the hedge is intended to improve medium-term earnings stability, that Treasury’s contribution should moderate from this quarter’s level, that proprietary flow has improved for two quarters but the back book still reflects runoff dynamics, and that capital-return timing depends on earnings, credit, RWA growth and embedded loss movements.