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Highlights
- Westpac (ASX:WBC) reports $1.7 billion net profit in Q1 FY25, reflecting a 9% decline from the previous half-year’s quarterly average.
- Net interest margin (NIM) at 1.82%, with core NIM at 1.81%, slightly down due to competitive mortgage conditions.
- Strong deposit and loan growth, with customer deposits increasing by $14.4 billion and institutional loans rising by 6%.
Westpac Banking Corp (ASX:WBC) has released its financial results for the first quarter of FY25, providing insights into the bank’s performance and market trends. The latest update reveals a mixed financial picture, with profitability slightly pressured but operational momentum remaining steady.
Performance Overview
For Q1 FY25, Westpac (ASX:WBC) reported a net profit of $1.7 billion, marking a 9% decline compared to the average quarterly performance in the second half of FY24. However, when adjusting for notable items, the bank's net profit stood at $1.9 billion, reflecting a 3% increase from the previous half-year’s quarterly average.
A key metric for banks, the net interest margin (NIM), was reported at 1.82%, with the core NIM at 1.81%. While this represents a minor dip of 2 basis points (0.02%) from the prior period, the bank attributed this to an evolving deposit mix and increased competition in the mortgage sector. The company highlighted that a shift toward lower-spread savings and term deposits, partially offset by higher earnings from capital and hedged deposits, influenced this outcome.
Revenue and Loan Growth
Despite the slight contraction in NIM, Westpac (ASX:WBC) showed resilience in its revenue and loan growth. Excluding notable items, the bank’s pre-provision profit increased by 3%, with revenue rising by 2% and expenses increasing by 1%.
Net interest income grew by 1%, supported by a 1% expansion in average interest-earning assets. Customer deposits surged by $14.4 billion, reflecting strong banking activity. Additionally, total loan growth stood at 3%, with institutional lending showing an even stronger increase of 6%.
Expense and Impairment Trends
Westpac (ASX:WBC) noted a 1% increase in expenses, mainly attributed to wage and salary growth. However, this was partially balanced by seasonally lower investment spending. Looking ahead, wage adjustments effective from January 2025 and increased investment in the UNITE program are expected to impact expense trends.
On the credit risk front, impairment charges remained low, rising slightly to 5 basis points (0.05%) from the previous 4 basis points (0.04%). The bank stated that this reflects continued financial resilience among its customers.
Market Performance and Outlook
Westpac’s (ASX:WBC) share price has seen a notable rally of over 30% in the past year, underscoring investor confidence. However, with the bank’s underlying profit growing at a moderate pace, its current valuation presents a key consideration for market participants.
