The Westpac Banking Corp (ASX: WBC) share price is in focus after the ASX bank share reported its FY26 third quarter.
Westpac is one of the largest banks in Australia, with a focus on lending to households through a number of brands including Westpac, Bank of Melbourne and Bank of St George.
FY26 third quarter update
Westpac reported that its statutory net profit increased by 3% compared to the FY26 first half quarterly average. This is for the three months to 30 June 2026.
It also said that its net profit excluding notable items increased by 2% compared to the FY26 first half quarterly average.
The bank said that its revenue increased by 1%, with a 2% rise in net interest income more than offsetting a 3% decline in non-interest income.
Pre-provision profit increased by 1% to $2.8 billion. The impairment charges were 0.10% of average gross loans.
NIM performance
Westpac reported that the net interest margin (NIM) – what profit (in percentage terms) it makes on the money it lends out, including the cost of funding (such as term deposits and savings accounts) – was stable at 1.89%.
The core NIM was stable at 1.78%, with benefits from the higher interest rate environment and liquid assets offset by competitive pressures in lending, a change in the deposit mix, and a higher proportion of customers qualifying for saving bonus rates. The core NIM increased by 1 basis point compared to the second quarter of FY26.
The ASX bank share also said that the treasury and markets contributed 11 basis points (0.11%) was steady, though up 7 basis points (0.07%).
Westpac said that operating expenses were well managed and only increased by 1%, with salaries, wages and investment contributing to that growth. The ASX bank share continues to target productivity savings of more than $550 million in FY26.
What about lending?
Westpac said that average monthly mortgage application volumes have dropped around 20% since the federal budget tax changes.
The ASX bank share is now expecting housing credit growth of 4.7% in FY27, compared to 6.8% in FY26. Investor credit growth is expected to slow from 9.1% in FY26 to 4.5% in FY27, while owner occupier loan growth is expected to slow from 5.7% to 4.8%.
In FY28, total loan growth is expected to be 5.2%, with 5.6% for owner occupiers and 4.4% growth for investors.
During this quarter, its risk-weighted assets (RWA) – essentially lending – increased from $458.3 billion at March 2026 to $464.5 billion at June 2026.
In terms of lending arrears, there has been a slight increase in Australian mortgage hardship and 30+ day Australian mortgage delinquencies over the last few months.
Final thoughts on the Westpac share price
Westpac believes that the undersupply of housing combined with population growth is expected to partially offset the impact of higher interest rates and Federal Government policy changes.
A lower growth outlook is not especially compelling, though I’d think this performance was adequate if I were a shareholder.
I expect this level of profit will be enough to fund a good dividend in the upcoming FY26 result, but I’m not expecting much growth amid a slower lending growth environment, competition and elevated risk of bad loans.
Westpac is not one of the first ASX dividend shares I’d buy today.
