Westpac Delivers Stable 1Q26 Profit with Strong Capital and Steady Loan Growth

About Westpac Banking Corporation

Westpac Banking Corporation (ASX: WBC) is one of Australia’s largest financial institutions, providing banking, wealth management and financial services to retail, business and institutional customers across Australia and New Zealand. Founded in 1817, Westpac is Australia’s oldest bank and remains a systemically important institution within the domestic financial landscape.

The Group operates across Consumer, Business & Wealth, Westpac Institutional Bank and Westpac New Zealand divisions, servicing millions of customers through physical branches, digital platforms and corporate banking channels. Its diversified earnings base and conservative balance-sheet approach position it as a core pillar of the Australian financial system.

In its 1Q26 update, Westpac highlighted stable profitability, margin discipline and continued investment in simplification and digital transformation programs designed to drive long-term efficiency and customer growth.

Financial Performance

For the quarter ended 31 December 2025, Westpac reported statutory net profit of $1.9 billion, representing a 5 per cent increase compared with the 2H25 quarterly average. Net profit excluding notable items was also $1.9 billion, up 6 per cent, reflecting operational momentum and lower quarterly expenses.

Pre-provision profit rose 7 per cent to $2.8 billion, supported by steady income generation and improved cost discipline. Net operating income increased 1 per cent to $5.8 billion. Net interest income was broadly stable at $5.0 billion, up 2 per cent compared with the 2H25 average, benefiting from loan growth and improved contributions from Treasury and Markets.

Non-interest income softened 4 per cent to $0.7 billion, reflecting lower fee income and subdued trading activity during the quarter.

Return on equity improved to 10.4 per cent, while return on tangible equity strengthened to 11.7 per cent, reflecting improved operational leverage and earnings stability.

Lending Growth and Margin Dynamics

Gross loans reached $879 billion, up 7 per cent year-on-year, while deposits rose to $735 billion, also up 7 per cent. Lending growth continues to be supported by both mortgage and business segments, despite competitive pricing conditions.

The net interest margin moderated slightly to 1.94 per cent, down 1 basis point versus the 2H25 average. Core margin compression was partly offset by improved Treasury and Markets contributions. While funding competition and deposit pricing remain headwinds, Westpac’s diversified funding mix and disciplined loan repricing have helped stabilise margin outcomes.

Average interest-earning assets expanded to over $1 trillion, reinforcing the scale of Westpac’s domestic banking franchise.

Asset Quality and Credit Outlook

Credit quality metrics remain stable. The impairment charge equated to 6 basis points of average loans for the quarter, reflecting a modest increase from historically low levels but remaining well within long-term averages.

Total provisions for expected credit losses remain conservative relative to portfolio size. Mortgage hardship balances were stable at approximately 0.54 per cent of the home loan book, while 86 per cent of customers remain ahead on repayments. Offset balances continue to provide borrowers with significant buffers.

Stressed exposures across business portfolios remain contained. Sectoral risks in construction and wholesale trade are being actively monitored, but overall asset performance reflects resilient household and corporate balance sheets.

Westpac’s central economic forecasts assume moderate GDP growth across Australia in 2026 and a contained unemployment rate, underpinning stable credit conditions.

Capital, Funding and Liquidity

Westpac continues to operate with strong capital and liquidity buffers. The Common Equity Tier 1 (CET1) capital ratio closed the quarter at 12.3 per cent, comfortably above regulatory minimums and providing strategic flexibility.

Risk-weighted assets rose modestly in line with lending growth. Liquidity remains robust, with the Liquidity Coverage Ratio averaging 133 per cent and the Net Stable Funding Ratio at 112 per cent.

During the quarter, the Group maintained diversified access to wholesale funding markets, issuing senior bonds, covered bonds and capital instruments across domestic and international markets.

The strength of Westpac’s balance sheet provides capacity to absorb potential economic volatility while continuing to support lending growth and shareholder returns.

Strategic Execution and Outlook

Westpac continues to progress its multi-year transformation strategy focused on simplification, digitalisation and productivity. Ongoing investment in core banking platforms, customer-facing technology and operational automation is designed to reduce structural costs and improve service standards.

Management has emphasised disciplined execution as the primary focus for FY26. While competitive pressures in mortgage pricing and funding persist, the Group’s scale, diversified earnings base and capital strength provide resilience.

Looking ahead, Westpac expects lending growth to remain steady, credit conditions to normalise gradually and margins to remain broadly stable. Continued cost management and operational efficiency programs should support earnings stability through FY26.