Westpac earnings beat estimates but shares slump on higher cost outlook

Mon 07 Nov 22, 11:11am (AEST)
Westpac bank logo in the dark
Source: iStock

Key Points

  • All banking divisions grew core earnings in the second half
  • Net interest margins improved from 1.85% in the first-half to 1.90% in the second
  • Westpac has yet to see consumers falter under higher rates, but on standby for a deteriorating outlook

Westpac's (ASX: WBC) full-year earnings topped Bloomberg estimates, fuelled by higher growth in business lending, cost cutting actions and improving credit quality.

The bank posted cash earnings of $5.27bn for the year ended 30 September, down -1% compared to the prior period due to a $1.1bn loss on the sale of its life insurance business.

Westpac shares will go ex-dividend on Thursday, 17 November for a final dividend of 64 cents, up 6.7% compared to a year ago.

Results at a glance:

Full year



% change

Revenue ($m)




Net interest margin (%)



-15 bps

Expenses ($m)




Cash earnings ($m)




Final dividend (cps)




Source: Westpac | Table: Market Index

FY22 highlights: A second-half turnaround

2022 was described as a 'year of two halves', with a positive start as the economy recovered from the effects of the pandemic and then hit by the Ukrainian-Russian war, higher inflation and rapidly rising interest rates.

Westpac's consumer segment earnings fell -7% to $2.33bn (50.8% of Group earnings) which reflected weaker margins and mortgage competition. This was offset by a respective 36% and 39% earnings growth across business and institutional banking segments, which account for a combined 21.7% of Group earnings.

The rising interest rate environment marked an end to an era of declining net interest margins, which fell to 1.85% in the first-half but rose to 1.90% in the second half.

Despite 275 basis points worth of interest rate hikes since May, Westpac said that its credit quality metrics improved over the year and remain better than pre-covid levels. Stressed assets as a percentage of total committed exposures fell from 1.36% to 1.07%.

Still, Westpac set aside impairment provisions of $4.6bn for a potential rise in customer stress. compared to $3.8bn in impairment charges in FY21.

Westpac has been working hard on costs, with year-on-year expenses down -7% thanks to an ongoing 'simplification program' and a reduction in full-time employees. Still, the bank had to revise its FY24 cost target to $8.6bn from $8.0bn to reflect higher inflation including wage increases and regulatory spend.

The upward revision might be the main catalyst behind Westpac's selloff on Monday.


"We are not yet seeing increases in hardship or stressed assets. Many customers built up savings during the past two years and 68% remain ahead on their mortgage repayments," said CEO Peter King.

"Higher interest rates are likely to support net interest margins, although these benefits are expected to be tempered by continuing competition across both loans and deposits."

"Nevertheless, higher interest rates will inevitably impact businesses and consumers. As a result, some customers will experience a heightened level of stress," he warned.

In terms of FY23 outlook, Mr King said the bank is looking to grow "broadly in line with our major bank peers", given the growth achieved in 2022 across business, commercial and institutional lending.

Westpac bank share price chart
Westpac share price chart


Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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