Australia’s second-largest mortgage lender, Westpac Banking Corp, reported a 1% decline in its first-half profit for the fiscal year ending March 2025. The bank’s net profit stood at A$3.32 billion (USD $2.14 billion), slightly missing market expectations of A$3.43 billion. This marks a modest but notable downturn for the lender amid rising operational challenges and intensifying global financial uncertainty.
The bank’s earnings were primarily affected by a narrowing net interest margin and a rise in costs linked to investments in technology and compliance upgrades. Westpac has been implementing its internal simplification project, UNITE, aimed at streamlining services and operations, but the related transitional expenses have temporarily weighed on the bottom line. Net interest margin (NIM)—a key indicator of profitability in the banking sector—dropped to 1.88%, down by one basis point from the previous year. On a core basis, the margin fell even further to 1.80%.
Westpac CEO Peter King noted that while loan volumes remained strong, competition in mortgage pricing and deposit rates continued to put pressure on margins. He also flagged geopolitical uncertainties, including global trade tensions and tariff developments, as a key risk to future earnings, especially given Australia’s exposure to Asia-Pacific markets. The bank emphasized that ongoing global financial instability, particularly from U.S.-China tensions and regional supply chain vulnerabilities, could further impact credit demand and investment confidence.
Operationally, Westpac’s costs increased 6%, driven by investments in digital transformation, cybersecurity enhancements, and regulatory compliance. However, the bank signaled that these investments are expected to deliver long-term efficiencies.
Despite the profit miss, Westpac declared an interim dividend of 75 Australian cents per share, unchanged from the previous period. King expressed cautious optimism, highlighting continued credit quality strength and customer deposit growth. Still, he acknowledged that headwinds—both domestic and international—would need to be closely monitored over the coming quarters.
The bank’s result underscores the broader pressure facing Australia’s major banks in 2025 as they grapple with tighter margins, elevated inflation, and growing macroeconomic volatility.
Source: Reuters
