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Highlights:
- Westpac (ASX:WBC) reports a first-quarter profit of A$1.7 billion, reflecting a 9% decline.
- The bank’s economic outlook shows slow GDP growth, with rising unemployment expected.
- Property markets forecast slight declines in commercial property and gains in residential property.
Westpac Banking Corporation (ASX:WBC) has issued a warning about sluggish economic growth in Australia, with concerns over rising unemployment and financial strain across various sectors. The lender reported a first-quarter profit of A$1.7 billion for the period ending December 31, 2024, marking a 9% decrease in earnings. Despite this drop, the bank acknowledged a “solid first-quarter performance,” as several one-off items impacted its results. Excluding these factors, Westpac would have posted a profit of A$1.9 billion, representing a 3% increase compared to the previous year.
Chief Executive Officer Anthony Miller, who took the reins of the bank in mid-December, highlighted the challenges faced by businesses, which are grappling with cost pressures and subdued demand. Despite the challenging environment, Westpac reported a decline in troubled loans, with provisions for expected credit losses falling slightly to A$5.091 billion, driven by reduced non-performing home loans. However, business lending provisions remain elevated, signaling continued risk in that sector.
Looking ahead, Westpac projects that Australia’s GDP growth will remain weak, expecting only a 2.2% growth rate in both 2025 and 2026. Unemployment is also a concern, with the bank revising its forecast. Previously, it had expected unemployment to peak at 4.7% in 2025, but now it anticipates a 4.5% unemployment rate by the end of the 2025 financial year. This increase is a response to the challenging economic conditions faced by households and businesses.
Westpac has also provided insights into property markets, forecasting a 1.3% decline in commercial property values for 2025, while residential property values are expected to rise by 3%. However, both property markets are expected to recover by 2026, with house prices projected to grow by 7%, and commercial property values expected to bounce back by 4.2%.
During the quarter, Westpac’s revenue grew by 2%, while expenses rose by 1%. The bank also saw an increase in both loans and deposits, with total lending rising 5% to A$820 billion, and deposits climbing 6% to A$688 billion. However, its core net interest margin decreased slightly by two basis points to 1.81%.
Despite the challenging conditions, shares of Westpac surged nearly 37.5% in the past year, closing at A$34.71, showing investor confidence in the company’s long-term performance.
