Westpac Banking Corporation has cautioned that Australia’s economic growth is likely to stagnate, with unemployment expected to rise, as the lender reported a first-quarter profit of A$1.7 billion.
The result, covering the three months to December 31, reflected a 9% decline in earnings, impacted by several one-off items that weighed on the bank’s accounts.
Westpac chief executive Anthony Miller, who assumed leadership on December 16, acknowledged that while the bank delivered a “solid first-quarter performance,” it was seeing signs of financial strain across parts of its customer base.
“Many businesses face cost pressures and lower demand,” he said.
The bank’s profit was affected by items that reduced its underlying result by nearly A$200 million. Excluding these, Westpac would have recorded a first-quarter profit of A$1.9 billion, a 3% increase.
Westpac reported an improvement in troubled loans with provisions for expected credit losses falling slightly to A$5.091 billion from A$5.096 billion in the previous quarter.
The decline was driven by reductions in non-performing home loans, though business lending provisions remained elevated. Loans overdue by 90 days or more fell to 0.44% of Westpac’s portfolio, down from 0.47%.
The bank continues to wind down its RAMS home lending business following its closure last year.
Economic outlook and unemployment
Westpac’s accounts suggest Australian gross domestic product (GDP) growth will remain subdued at 2.2% in 2025 and 2026.
The bank had previously anticipated unemployment would peak at 4.7% this year before easing to 4.5% in 2026 but it has since revised its forecast, now expecting unemployment to reach 4.5% by the end of the 2025 financial year.
The Australian Bureau of Statistics (ABS) recorded unemployment at 4% in December, while population growth stood at 2.1%.
Miller acknowledged the pressures on households amid higher interest rates and living costs but expressed optimism about the potential for rate relief.
“Encouragingly, inflation has eased and we could see the Reserve Bank of Australia reduce the cash rate as early as tomorrow,” he said.
Miller added that any rate cut could offer relief to households and “over time, support business activity.”
Property and financial performance
Westpac forecasts commercial property prices to decline by 1.3% this year, while residential property values are expected to rise by 3%. Both markets are anticipated to recover in 2026, with house prices climbing 7% and commercial property prices rebounding by 4.2%.
During the quarter, Westpac’s revenue increased by 2% while expenses rose by 1%. Loans and deposits also grew, with total lending rising 5% over the 12 months to December, reaching A$820 billion. Deposits climbed 6% to A$688 billion.
However, the bank’s core net interest margin fell by two basis points to 1.81%.
Westpac has completed 62% of its A$3.5 billion share buyback program, one of several on-market buybacks undertaken by major Australian banks.
Shares in Westpac have surged nearly 37.52% over the past year, last trading at A$34.71.