Shares in Westpac (ASX: WBC) may come under pressure at the open after the banking giant posted a mixed bag interim result where newly appointed CEO Anthony Miller flagged widespread uncertainty around where United States President Donald Trump will land on global tariff settings.
For the six months ending 31 March 2025 Westpac’s FY25 profit of $3.32 billion was down 1% on last year and well below the 3% consensus increase to $3.43 billion, with some analysts expecting $3.5 billion.
Excluding notable items, net profit during the half was $3.46 billion, while net interest margin (NIM) was unchanged from a year ago at 1.80%.
The lender also disappointed analysts on the dividend front with an interim dividend of 76 cents a share, down from a combined 90 cents a year ago, and below the 80 cents census forecasts.
Westpac’s margins remained steady despite persistent competition in lending and deposits.
However, due to increased wages, technology costs and spending on its UNITE program, the banking group flagged a 6% increase in operating expenses during the half year.
Today’s result shouldn’t have come as a total surprise to the market after Miller, in a prelude to delivering his first group results, flagged a $140 million hit to profit - due to hedging impact – last week.
“We’re managing margins actively in a competitive environment, achieving sustainable growth in our target areas. In particular, our focus on business and institutional is delivering results with Australian business lending up 14% and institutional lending up 15% over the year,” said Miller who is expecting economic growth of 1.9% this year.
Key interim results announced today
With Westpac focusing on profitability over volume growth, mortgage lending was 5% higher over the six months to March 31, at $485 billion, slightly below the market average. Business lending growth was up 14% to $106 billion.
Lending to the largest companies, through the institutional bank, rose 15% to $107 billion. The banking group’s consumer banking division posted a 2.8% rise in interim profit to $1.09 billion, compared with last year.
The business and wealth unit saw a 4.8% dip in profit to $1.12 billion.
The institutional banking division saw profit climb 11.3% to $758 million, while the NZ unit posted a 10% increase to $525 million.
Group NIM fell 1 basis point to 1.88%.
Looking forward
The banking group expects housing credit across the industry to slow to 5.3% from 5.5% last year.
While lending to business is expected to cool somewhat to 6.4% from 8.9% Miller expects the prospect of further official rate cuts this year to underpin improving credit quality.
“Mortgage delinquencies and impairment charges remain low,” Miller noted that the credit impairment charge was 6 basis points of average loans, down from 9 basis points.
Miller also reminded the market that trade tariff knock-on remains a key risk going forward.
“Geopolitical uncertainty is a key risk that’s as high as it has been for a very long time,” he said.
“Changes to global trade policies have impacted markets and funding for the bank. Despite the volatility, it’s important that we look through the noise and avoid reacting to the headlines. Australia is well-placed to handle the instability.”
Miller wants Westpac to rise to a number-one ranking among its rivals by September 30, 2029, across consumer, business and institutional banking.
He also wants Westpac to have a cost-to-income ratio lower than the average of its peers by late 2029.
The banking group was 2.7 percentage points above that measure on September 30.
Westpac has a market cap of $114 billion; the share price is up 26% in one year and up 3.5% year to date.
While Westpac's 200-day moving average is trending upward and highlights long-term investor interest in the stock, investors should be cautious. The 20-day moving average falls as upward momentum wanes.
Consensus is Moderate Sell.
This article does not constitute financial or product advice. You should consider independent advice before making any financial decisions.
