Westpac Banking Corporation (ASX: WBC) – Westpac 2026 Interim Financial Results

Westpac’s first half 2026 results show a bank navigating conflicting currents: solid core lending momentum and a strong capital position offsetting a narrowing net interest margin and rising credit provisions that signal management’s more cautious economic view.

The bank reported statutory net profit of $3.414 billion, down 5 percent from the second half of 2025 but up 3 percent year-on-year. Stripping out notable items, net profit stood at $3.5 billion, down 1 percent sequentially but broadly flat year-on-year. The board approved a fully franked interim dividend of 77 cents per share, representing a 77 percent payout ratio on statutory earnings. Return on equity was 9.6 percent, while return on tangible equity reached 11.0 percent.

On the lending side, Westpac grew Australian mortgages, excluding RAMS which is in runoff, at 7 percent over the year and outpaced system growth at 1.2x in the half. The bank lifted proprietary lending from 33 percent to 34 percent of new mortgage originations. Australian business lending grew 16 percent year-on-year with broad-based strength across agriculture, health and professional services. Deposits grew 7 percent over the year, with Australian household deposits accelerating notably.

The headwind is net interest margin. Core NIM declined 2 basis points to 1.78 percent year-on-year and 4 basis points sequentially. Management attributed the compression to persistent competitive lending spreads and the lag between rate cuts and customer repricing. This recurring theme across the Australian banking sector suggests further margin pressure may persist if competitive intensity remains elevated.

Credit quality improved on the surface. Stressed exposures as a percentage of total committed exposures declined to 1.16 percent, down 12 basis points from September. Mortgage delinquencies dropped to 0.64 percent, a healthy level. However, management took a more cautious stance on provisions, lifting collectively assessed provisions to $4.58 billion and adding portfolio overlays specifically for energy-intensive sectors. Credit impairment charges represented 10 basis points of average loans, up from 4 basis points in the prior half and 6 basis points a year ago. The bank flagged that revised economic outlook, ongoing conflict affecting some customers and emerging stress in certain sectors drove the provision lift.

The capital position remains strong. The CET1 ratio of 12.4 percent sits comfortably above the 11.25 percent target, providing $2.7 billion of buffer above minimum after the interim dividend. The deposit to loan ratio of 84.2 percent remains conservative by historical standards. On execution, the UNITE transformation progressed with the first large-scale migration to the Panorama wealth platform completed and migration of commercial customers to One Commercial Bank underway.

For investors, the question is whether NIM compression will accelerate earnings headwinds and whether management’s provisioning assumptions prove appropriate given the economic commentary. Watch deposit mix trends, proprietary lending capture rates and quarterly credit flows in the coming quarters as key indicators of trajectory.

View the full ASX announcement (PDF)

About Westpac Banking Corporation (ASX: WBC)

Westpac Banking Corporation is one of Australia’s oldest and largest banks, providing consumer, business, and institutional banking services. It operates across Australia, New Zealand, and the Pacific region.

If you would like to discuss this announcement or how it might affect your portfolio, request a callback or call us on 1300 889 603.