Westpac Banking Corporation

Westpac reported net profit excluding notable items up 5% versus the second half of FY25 average. Revenue was up 1%, driven by a 2% rise in net interest income and a 4% decline in noninterest income; operating expenses excluding the 2H25 restructuring charge were stable, while including the charge they were 5% lower. Pre-provision profit increased 6% overall, or 2% ex-restructuring. Net interest margin declined 1 basis point to 1.94%, and core NIM was 1.79%, down 3 basis points versus 2H25 and 1 basis point sequentially. Deposits grew $12 billion and loans grew $22 billion in the quarter. CET1 capital ratio was 12.3%, total credit provisions were $5 billion, coverage was 125 basis points, and credit impairment charges were 6 basis points of average gross loans. Looking ahead, management expects deposit growth to remain strong through FY26, institutional lending growth to moderate over the rest of FY26, and the RAMS transaction to settle by mid-year, with an expected $16 billion reduction in mortgages. They also said the first-half net replicating portfolio benefit should be about 1 basis point, the recent RBA rate rise will be a slight headwind in Q2, and the Treasury contribution should moderate from the quarter’s 15 basis points.

No CEO spoke on the call; the lead executive was CFO Nathan Goonan. His strategic message was that Westpac is executing its five priorities, deepening customer relationships, and investing in the business while keeping the balance sheet positioned for the RAMS sale. He sounded constructive on the economy, saying demand for both business and household credit should remain resilient.

Nathan Goonan emphasized that the quarter reflected disciplined execution and improving operational momentum. He cited $12 billion deposit growth, $22 billion loan growth, stable operating expenses at $3 billion ex-restructuring, and a 12.3% CET1 ratio, while noting that credit metrics improved and stressed exposures fell 11 basis points. On margins, he pointed to a 1 bp NIM decline to 1.94%, a 15 bp Treasury contribution, a $15 billion increase in the deposit hedge to $92 billion, and an expectation that the hedge will contribute about 1 bp in the first half. He also said RAMS completion by mid-year should remove $16 billion of mortgages from the balance sheet and add a 22 bp CET1 benefit in 2H26.

Analysts focused on leadership changes in IT, the increased deposit hedge, core NIM drivers, proprietary mortgage flow, funding of loan growth, Treasury’s strong quarter, and capital implications from RAMS and RWA optimization. Management said the IT departures were planned retirements with no material impact on the UNITE program and promised a fuller update on March 26. On the hedge and NIM, Goonan said the added hedge is meant to improve medium-term earnings stability, and that the first-half benefit should be about 1 bp. On mortgages, he said proprietary flow improved to 35% and that the team is seeing “green shoots,” but the prop book still runs off faster than broker flow; on capital, he said risk-weight optimization remains a positive but likely moderates from prior years, while RAMS and potential NZ changes could provide additional support.