The Westpac Banking Corp (ASX: WBC) share price is in focus after the ASX bank share gave a HY26 update.
Westpac is one of the largest banks in Australia which operates a number of other brands including Bank of St George, BankSA and Bank of Melbourne.
FY26 half-year update
Westpac said in an ASX announcement that it’s well-positioned to support customers amid ongoing geopolitical uncertainty.
The ASX bank share said the supply shock in the Middle East is expected to result in higher inflation and higher interest rates, leading to a slowing of growth.
In terms of performance, Westpac revealed that it saw a number of pleasing operating metrics during the FY26 first half.
It said balance sheet momentum was solid, with lending and deposit growth of 4% and 3%, respectively.
The bank’s core net interest margin (NIM – the margin it makes on its loans which includes funding costs) was stable in the second quarter of FY26, excluding the timing impact of rate rises.
Westpac also said that ongoing productivity initiatives supported a 2% decline in expenses (excluding notable items).
Finally, the ASX bank share said that asset quality metrics improved and the common equity tier 1 (CET1) capital ratio strengthened in the second quarter.
However, the bank said that the revised economic outlook has been reflected in its ‘base case provision scenario’ and a new ‘portfolio overlay’ has been added for energy intensive sectors. Part of the impacts of this led to a credit impairment charge of 10 basis points (0.10%) of average gross loans.
In other words, it has increased its provision for some loans going bad.
RAMS impact
Westpac said that the sale of the RAMS mortgage portfolio to a consortium which includes Pepper Money Ltd (ASX: PPM), KKR and PIMCO remains on track for completion in the second half of FY26.
The upcoming HY26 result will include a notable item related to the transaction costs for the sale, which will reduce the reported net profit after tax (NPAT) by $75 million.
Final thoughts on the Westpac share price
The bank continues to perform well and defend its market share, while ensuring stable profit margins.
I’m not sure how the elevated inflation and rising interest rate environment will play out, but I’m expecting Westpac’s margins to increase a little as a result.
While the bank is a solid performer for now, there are other ASX dividend shares I’d prefer to buy that either have more growth potential or have a stronger dividend yield that could produce stronger returns that Westpac shares.
