Westpac has reported a fall in full-year net profit after tax, with earnings slipping as competitive pressure and higher investment spending weigh on the bank’s performance, even as loan and deposit growth remains solid.
Net profit after tax has declined 1 per cent to $6.9 billion, while net profit excluding notable items has fallen 2 per cent to $7 billion.
Chief executive Anthony Miller said it has been “a solid year at Westpac” and highlighted the bank’s “very strong balance sheet and momentum in our target segments”.
However, the result underscored a more challenging operating environment, with lower returns and rising expenses tempering growth.
Return on tangible equity excluding notable items has eased to 11 per cent, down 24 basis points on the prior year, while earnings per share remained flat.
The final dividend of 77 cents per share brings total dividends to 153 cents, up 1 per cent from FY24.
Net interest income rose 3 per cent to $19.5 billion, supported by a 3 per cent lift in average interest-earning assets, but net interest margin declined by 1 basis point to 1.94 per cent amid what the bank describes as “a competitive environment”.
A modest 3-basis-point margin improvement in the second half provides some support.
Loan growth has been a key positive, up 6 per cent to $851.9 billion, while customer deposits rose 7 per cent to $723 billion.
Business and institutional divisions lead the expansion, with institutional lending up 17 per cent, business lending up 15 per cent and agribusiness lending up 22 per cent.
“This reflects our focus and investment in regional Australia,” Miller said, pointing to new service locations including Moree.
However, costs increased meaningfully, with operating expenses rising by 9 per cent to $11.9 billion, including $273 million in restructuring costs.
Westpac attributed the increase to continued investment in technology, the UNITE program and additional staff. Miller acknowledged the uplift, noting the bank has aimed to ensure “the right investment in the right places and the right people in the right seats”, and said the bank remains focused on reducing its cost-to-income ratio over time.
Meanwhile, the bank continues to streamline operations, entering an agreement to sell the $21.4 billion RAMS mortgage portfolio after closing it to new business last year. The sale to a consortium includes Pepper Money, KKR and PIMCO.
Key technology projects — including the BizEdge lending platform, which has reduced average time to decision by 45 per cent, and the Westpac One institutional platform — are progressing, though benefits remain in early stages.
Credit quality remained broadly stable, with impairment charges falling to 5 basis points of average loans from 7 basis points, supported by easing cost-of-living pressure and low business stress.
APRA lifted its enforceable undertaking and removed an additional capital overlay, which Miller called a recognition of improved risk culture, adding that “strong risk management is not a destination, it’s a discipline”.
Miller remained positive about the outlook but notes risks including inflation and a recent rise in unemployment.
“This will be a delicate balance for the RBA to manage,” he said, adding that global uncertainty also persists.
