For the six months ended March 2025, Westpac posted a net profit of A$3.32 billion, down 1% from the previous year and falling short of analyst expectations by A$110 million.
The profit miss was primarily attributed to a 6% surge in operating expenses, which climbed to A$5.7 billion, largely due to ongoing technology investments and the bank’s A$1.2 billion UNITE simplification program. While lending volumes grew across home, business, and institutional sectors, these gains were offset by persistent margin pressures and higher costs.
Westpac’s net interest margin-a key measure of banking profitability-fell by one basis point year-on-year to 1.88%, while the core margin narrowed by three basis points to 1.80%.
This contraction was driven by fierce competition in the mortgage market, tighter loan spreads, and a shift by customers toward lower-margin savings accounts. The bank’s non-interest income also declined, reflecting softer trading revenues and stagnant fee income.
Global Trade Risks and Geopolitical Uncertainty
In a candid statement, CEO Anthony Miller highlighted that “changes to global trade policies have impacted markets and funding for the bank,” underscoring the heightened risks from shifting tariffs, supply chain disruptions, and broader geopolitical tensions.
Miller described geopolitical uncertainty as “a key risk that’s as high as it has been for a very long time,” with U.S. tariff announcements and global supply chain volatility creating significant headwinds for Australian businesses.
The ACCI-Westpac Business Survey for Q1 2025 revealed that 45% of manufacturers are facing rising input costs, while 26% reported worsened labor availability-both exacerbated by global trade instability. Export expectations among manufacturers have also weakened, as concerns mount over the indirect impact of U.S. tariffs on global demand.
Market Reaction and Analyst Outlook
Following the earnings report, Westpac’s shares closed at A$32.29, down 3.2% for the day. Analysts warn that margin pressures could intensify further, especially if the Reserve Bank of Australia moves to cut interest rates, compressing net interest margins across the sector.
The bank has already raised the weight of its downside scenario for expected credit losses to 45%, signaling a more cautious outlook amid economic uncertainty.
Despite the challenges, Westpac declared an interim dividend of 76 Australian cents, up from 75 cents a year earlier, signaling confidence in its underlying resilience. Improved credit quality, with home loan delinquencies falling to 0.86%, offers some reassurance to investors.