Westpac Delivers Solid Half-Year Result as Growth and Strong Capital Support Execution

About Westpac Banking Corporation

Westpac Banking Corporation (ASX: WBC) is one of Australia’s major banking groups, operating across consumer banking, business and wealth, institutional banking and New Zealand banking. Its current focus is built around five strategic priorities: improving customer service, strengthening execution and risk management, investing in transformation, improving workplace capability and balancing growth with returns. In the latest result, those priorities were reflected in continued lending growth, cost discipline, higher investment in transformation and a more conservative provisioning stance as geopolitical and inflation risks rise.

The profit result was steady, with notable items masking some of the underlying picture

Westpac’s statutory net profit attributable to shareholders rose 3 per cent on 1H25 to $3.414 billion, although it was down 5 per cent on 2H25. Excluding notable items, net profit was $3.483 billion, up 1 per cent on the prior corresponding period and down 1 per cent on the second half. The main notable item in 1H26 was a $75 million after-tax charge associated with separation and transaction costs linked to the sale of the RAMS mortgage portfolio, partly offset by a $6 million after-tax hedging benefit.

That leaves the underlying result looking relatively stable rather than especially strong or weak. Compared with 1H25, operating income improved, but this was partly offset by higher credit impairment charges and modestly higher expenses. Compared with 2H25, lower operating income and higher impairment charges more than offset lower expenses. This is broadly consistent with a bank still growing, but under more margin pressure and taking a more cautious view on the risk backdrop.

Balance sheet growth remained solid across core markets

One of the clearest positives in the result was continued balance sheet growth. As shown in the highlights section and financial tables, gross loans rose 7 per cent over the year to $890.3 billion, while customer deposits also rose 7 per cent to $745.2 billion. Over the half alone, loans rose 4 per cent and deposits 3 per cent.

Australian housing loans excluding RAMS grew 7 per cent over the year, with Westpac saying it grew at 1.2 times system in the half. Business lending was even stronger, up 16 per cent over the year, with growth in both Business & Wealth and Institutional. On page 6, Westpac said this growth was diversified, with particular strength in agriculture, health and professional services in Business & Wealth, while Institutional growth was supported by stronger relationships with existing clients.

Deposits were also constructive. Australian customer deposits rose 8 per cent over the year, supported by strong household deposit growth, rising business transactional balances and continued public sector strength in Institutional. New Zealand deposits rose 3 per cent in NZ dollar terms. Westpac’s deposit-to-loan ratio eased to 84.2 per cent, still a healthy level, though slightly lower because loans grew faster than deposits.

These trends matter because they suggest Westpac is still winning enough business in its core markets to grow, even in a competitive environment.

Margins softened, but cost discipline helped offset the pressure

The main drag on underlying earnings was margin pressure. Westpac’s net interest margin excluding notable items fell to 1.89 per cent from 1.92 per cent a year earlier and from 1.95 per cent in 2H25. The bank attributed the decline mainly to lending competition, timing effects associated with interest rate changes and weaker Treasury performance. Core NIM declined by 4 basis points over the half, while Treasury and Markets’ contribution to NIM also eased.

Despite this, Westpac managed costs reasonably well. Operating expenses excluding notable items fell 6 per cent from 2H25 and were only 2 per cent higher than 1H25. The expense-to-income ratio excluding notable items improved to 51.67 per cent from 54.21 per cent in 2H25 and was slightly better than 1H25. The bank said lower expenses reflected productivity initiatives, seasonally lower staff and technology costs, and lower average FTEs, partly offset by higher UNITE spending and wage growth.

That is an important part of the story. Westpac is still investing heavily, but it is also extracting enough productivity benefit to stop those investments from driving a major deterioration in efficiency.

Credit quality metrics improved, but provisions were lifted prudently

Credit quality was a mixed but overall encouraging part of the result. Total stressed exposures as a percentage of total committed exposure fell to 1.16 per cent from 1.36 per cent a year earlier. Mortgage delinquencies also improved, with group mortgages 90-plus days past due declining to 0.64 per cent from 0.83 per cent a year earlier. Impaired exposures to gross loans also edged down to 0.23 per cent.

However, Westpac still lifted provisions. Credit impairment charges rose to $443 million from $250 million in 1H25 and $174 million in 2H25. The bank said this reflected a revised economic outlook, new portfolio overlays and an increase in new individually assessed provisions. Collectively assessed provisions rose to $4.58 billion, with overlays increasing to $282 million from $130 million a year earlier. Westpac specifically noted the addition of a new portfolio overlay for energy-intensive sectors and an increase in provisioning severity in response to the geopolitical backdrop.

So while the current book is showing signs of resilience, the bank is clearly choosing to hold a larger buffer against downside risk.

Capital and transformation remain central to the story

Westpac ended March 2026 with a CET1 capital ratio of 12.42 per cent, above its target ratio of 11.25 per cent in normal operating conditions. The bank said this leaves it with about $2.7 billion of capital above target after payment of the interim dividend. Liquidity also remained comfortably above regulatory minimums, with an LCR of 132 per cent and NSFR of 112 per cent.

At the same time, Westpac continues to invest heavily in transformation. Total investment spend was $919 million in the half, of which $401 million was directed to UNITE. Management said the program has now moved solidly into implementation, with the first large-scale migration completed onto Panorama and further work progressing to consolidate commercial banking and simplify products and systems.

That remains important because Westpac’s long-term case depends not only on balance sheet growth, but on whether it can simplify the organisation enough to lift productivity, customer experience and returns.

Outlook

Westpac’s first-half result reflects a bank in relatively sound shape. Lending and deposits are growing, costs are being managed, credit quality indicators are generally improving and capital remains strong. The trade-off is that margins are still under pressure and provisioning has become more conservative as geopolitical instability raises economic uncertainty. Overall, the result suggests Westpac is executing steadily, with enough balance sheet strength to absorb volatility while continuing to fund growth and transformation.