It posts modest profit decline amid margin pressures, shares fall
Westpac Banking Corp. reported a 1% year-on-year decline in net income to $3.32 billion for the six months ending March 31, as narrowing interest margins and rising operational costs weighed on results.
The outcome was in line with analyst expectations. Shares of the Sydney-based bank fell as much as 3.8% in early Monday trading before recovering some ground.
The bank's performance reflects broader challenges in the Australian banking sector, with anticipated interest rate cuts by the Reserve Bank of Australia expected to further compress net interest margins. Analysts also pointed to a tighter funding environment, which is limiting the effectiveness of Westpac’s strategic pivot toward expanding business lending.
Citigroup analyst Thomas Strong noted that while Westpac's execution of its UNITE technology overhaul and business loan expansion is progressing, funding pressures remain a key headwind. Lending across the board rose 5% to $825 billion, including 14% growth in business loans, 15% in institutional lending, and 5% in Australian housing loans.
CEO Anthony Miller, who stepped into the role recently, acknowledged the impact of monetary policy on the bank’s operations but highlighted improving credit quality, marked by a decline in mortgage delinquencies.
He emphasized that upcoming rate cuts would offer relief to households and noted that Westpac’s ongoing cost transformation, led by the UNITE program, is designed to improve long-term efficiency and customer service.
Westpac declared an interim dividend of 76 Australian cents per share. Miller also expressed readiness to collaborate with the newly re-elected Labor government on national priorities, including housing supply, cash access, and global competitiveness.
Despite short-term margin pressures, Westpac maintains that its strategic initiatives and resilient credit performance position it well to navigate the evolving economic landscape. The bank remains focused on digital modernization, prudent risk management, and strengthening its relationships with both retail and business customers.
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