The Westpac Banking Corp (ASX: WBC) share price is under the spotlight after the ASX bank share reported its HY25 result.
Westpac FY25 half-year result
Let’s look at some of the main numbers from the bank’s HY25 report:
- Core net interest margin (NIM) flat year on year, down 0.03% half on half
- Total loans up 5% year on year to $825 billion
- Total deposits up 7% year on year to $697 billion
- Underlying net profit after tax (NPAT) fell 1% to $3.5 billion
- Net profit after tax declined 1% to $3.3 billion
- Interim ordinary dividend per share of $0.76, up 1.3%
Highlights of the HY25 result
The bank said its core NIM – a profit margin measure showing how much a bank is making on its lending, while including its costs of lending (such as customer deposits) – was affected by persistent competition in lending and term deposits. The group NIM declined 1 basis point to 1.88%.
Westpac said it’s actively managing its margin in a competitive environment, achieving “sustainable growth” in its target areas.
Net interest income grew by 2% to $9.6 billion. Non-interest income decreased 3% to $1.4 billion, with trading and other income down 15%. Net fee income was flat at $840 million, while net wealth management income grew by 10%.
Operating expenses increased 6% to $5.7 billion, which included its UNITE program, technology and software costs, and salary and wage growth. Westpac said UNITE will “play a profound role in helping reduce the cost to income ratio over time” and improving service for customers. This could be a key initiative for the Westpac share price in the coming years.
Loan performance
Westpac revealed its Australian housing loan growth was 5%, at 0.9x the pace of the overall loan system. Business lending increased 14% and institutional lending grew 15%. The customer deposit growth was helped by the 9% growth of Australian deposits.
Pleasingly for Westpac’s loan performance, the credit impairment charge was 6 basis points (0.06%) of its average loan balance, down from 9 basis points. Westpac said households are “proving resilient” and levels of business stress “remain low”.
The bank said the improvement in credit quality metrics indicates Australia may have passed the worst point in the cycle.
Westpac dividend
While the overall payment is lower than last year, the HY24 result included a special dividend. The ordinary dividend is being hiked by $0.01 per share, or 1.3%, year on year.
Excluding ‘notable items’, Westpac’s dividend payout ratio is 75% – that’s quite generous, but it leaves some of the profit within the business for future growth.
Final thoughts on the Westpac share price
At the pre-open valuation, Westpac is close to its 52-week high and 10-year high. I certainly wouldn’t call this a fantastic time to buy, particularly if lower interest rates cause a reduction in the NIM in the coming years.
Westpac is not growing profit at a solid pace, so I’d be happy to leave it on the sidelines and focus on other ASX shares which have a stronger earnings growth outlook. I’d also consider plenty of ASX dividend shares as better ideas for income, with Westpac’s dividend yield being a fully franked 4.5%.
