Westpac Q1 Profit Increases Due to Loan and Deposit Growth

• Westpac added A$12 billion in customer deposits and A$22 billion in new loans during the quarter, offsetting margin compression
• Core net interest margin declined 3 basis points to 1.79% due to intense competition among Australian lenders for borrowers
• Common equity tier 1 (CET1) ratio fell 23 basis points to 12.3% at year-end, reflecting capital deployment

Westpac Q1 Profit Summary

Key Financial Results:

Westpac Banking Corp, Australia's third-largest lender by market capitalization, reported a 6% increase in unaudited underlying net profit for Q1, reaching A$1.9 billion ($1.35 billion) for the three months ended December 31. The profit growth was measured against the average of the previous two quarters.

Performance Drivers:

The profit increase was primarily driven by strong balance sheet expansion, with the bank adding A$12 billion in customer deposits and A$22 billion in new loans during the quarter. This volume growth helped offset competitive pressures in the Australian banking sector.

Margin Pressure:

Westpac's core net interest margin (NIM)—a key profitability metric measuring the spread between loan yields and deposit costs—declined 3 basis points to 1.79%. The compression reflects intense competition among Australian lenders vying for borrowers in a low-interest-rate environment.

Capital Position:

The bank's Common Equity Tier 1 (CET1) ratio, which measures financial strength and spare cash reserves, stood at 12.3% at year-end, down 23 basis points from September-end levels.

Market Context:

Australian banks continue facing margin pressure as they compete aggressively for market share in lending. However, Westpac's results demonstrate that volume growth in both deposits and loans can successfully counterbalance NIM compression, maintaining profitability momentum.

Management Commentary:

The bank attributed its performance to "continued operating momentum" that drove solid growth across customer deposits and loans, indicating sustainable business traction despite competitive headwinds in the sector.