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Highlights
- Westpac (ASX:WBC) posts 1% profit decline in HY25
- Dividend raised 1.3% despite profit pressure
- Credit quality improves amid steady lending growth
Westpac Banking Corporation (ASX:WBC), one of Australia’s major banks and a key component of the ASX200, has released its HY25 financial results, drawing investor attention due to a modest decline in profit and steady dividend growth. Despite facing margin pressures and rising expenses, the bank has demonstrated resilience through lending growth and improving credit quality.
For the six months ending HY25, Westpac reported an underlying net profit after tax (NPAT) of $3.5 billion, a 1% decline year over year. The statutory NPAT also fell 1% to $3.3 billion. Nevertheless, the bank increased its interim ordinary dividend to $0.76 per share, up 1.3%, reinforcing its positioning among prominent ASX dividend stocks.
Westpac’s total loans rose 5% to $825 billion, while total deposits increased by 7% to $697 billion, signalling a stable financial footing. Its net interest income grew 2% to $9.6 billion, although non-interest income dipped 3% due to lower trading and other revenues. Operating expenses climbed 6% to $5.7 billion, driven by technology upgrades, staff costs, and the bank’s internal transformation initiative called UNITE. This program is expected to streamline operations and improve efficiency over the long term.
Core net interest margin (NIM) remained relatively flat, impacted by intense competition in both lending and deposit markets. The group NIM edged down by 1 basis point to 1.88%. Westpac indicated it is actively managing its margins while focusing on sustainable growth in key areas.
In terms of lending, Australian housing loans grew by 5%, slightly below system growth. Business and institutional lending expanded strongly by 14% and 15% respectively. Notably, the bank’s credit impairment charge declined to 0.06% of average loan balances, suggesting that households and businesses are withstanding economic challenges well. Management highlighted that credit quality metrics have improved, potentially indicating a turning point in the credit cycle.
While the overall dividend payment is slightly lower than last year due to the absence of a special dividend, the ordinary dividend increase and a 75% payout ratio (excluding notable items) provide a signal of confidence in the bank’s long-term earnings capability.
