Westpac posted a net profit after tax (NPAT) of $1.7 billion in the three months to 31 December, a decrease of 9 per cent in the second half 2024 quarterly average.
In its full-year results released on Monday, Westpac reported that the impact of notable items related to hedge accounting – which it said will “reverse over time” – drove the decline. Excluding notable items, unaudited profit increased 3 per cent to $1.9 billion.
On the back of the announcement, Westpac shares fell by more than 4 per cent on Monday.
Moreover, return on average ordinary equity slumped 88 basis points (bps) to 9.4 per cent.
However, new chief executive Anthony Miller said that it was a “solid first quarter performance” for the bank, reflecting a “strong financial position, balance sheet growth and service excellence”.
“We continue to prioritise financial strength with capital, funding and liquidity remaining comfortably above regulatory minimums,” said Miller, who officially became Westpac’s CEO in December.
Meanwhile, Westpac’s group net interest margin (NIM) was 1.82 per cent, with a core NIM of 1.81 per cent. This was down 1 basis point from 2H24.
According to the bank, a provision release in 2H24 contributed to the margin decline.
“The modest decline reflects prudent management in the context of ongoing mortgage competition and further deposit mix shift towards lower spread savings and term deposits. Higher earnings on capital and hedged deposits partly offset these impacts,” Westpac noted.
Net interest income was down 6 per cent to $4.5 billion. However, excluding notable items, net interest income was up 1 per cent.
Moreover, expenses increased 1 per cent, driven by wage and salary growth, but partly offset by seasonally lower investment spend.
Looking at financial strength, Westpac saw a CET1 capital ratio of 11.9 per cent, which, while above the target operating range of 11-11.5 per cent, fell 62 basis points.
“The 62 basis point decline in the quarter reflected the 2H24 dividend payment and higher
risk weighted assets from loan growth and IRRBB,” Westpac explained.
The big four bank further confirmed that it has completed 62 per cent of the previously announced $3.5 billion on market share buyback.
Miller added: “Operating momentum was pleasing with customer deposit growth of $14.4 billion and loan growth of $13.4 billion.
“This includes Australian housing loan growth excluding RAMS of 2 per cent, business loan growth of 3 per cent and institutional loan growth of 6 per cent.”
According to the CEO, the bank has also taken strides in enhancing customer service and safety.
“Since the start of the year we have committed to 200 additional small business and SME bankers across Australia by the end of 2027,” he clarified.
Over the period, Westpac also commenced the rollout of digital financial management tools to help businesses track cash flows and reconcile expenses, and has launched multiple offset accounts.
However, looking forward, Miller said that the current economic landscape still weighs heavily on some of Westpac’s customers.
“Cost-of-living pressures and high interest rates remain challenging for some customers, while many businesses face cost pressures and lower demand.
“Encouragingly, inflation has eased and we could see the Reserve Bank of Australia reduce the cash rate as early as tomorrow. This should provide some relief to households and, over time, support business activity.”
