Sydney, Feb 26, 2026, 17:42 AEDT — Market’s done for the day.
- Westpac slipped 0.5%, giving back some gains after reaching a new high just the previous day.
- Hot inflation numbers jolted rate expectations, sending investors back to reviewing bank valuations.
- Focus is shifting to the Reserve Bank of Australia’s mid-March policy cues and upcoming CPI data.
Westpac Banking Corp slipped 0.5% to close at A$42.72 on Thursday, pulling back from a recent high notched the previous session. Shares ranged from A$42.46 to A$43.13 through the day.
Westpac’s modest shift drew notice, following a brisk February rally that sent Australia’s major banks climbing near the top of the market, even as fresh company news remained scarce.
No one’s really asking whether the banks cleared the bar anymore. The question now: what if the bar shifts again? Rate expectations keep shifting the goalposts.
January’s inflation reading in Australia surprised to the upside, sending core inflation to its highest level in 16 months and prompting traders to move up their bets on a potential rate hike by May, according to Reuters. After the numbers hit, Reserve Bank of Australia Governor Michele Bullock called for patience, warning that policy decisions are becoming “more difficult” while inflation remains elevated. Reuters
There’s a weary tone creeping into broker commentary. Analysts at both Macquarie and Morgan Stanley are flagging concerns that big-bank valuations look overextended. Morgan Stanley, in particular, has slapped an underweight on Westpac, citing both valuation and execution risk, according to Market Index.
Earlier this month, Westpac shares surged to record highs after the bank delivered a robust first-quarter update, Reuters reported. Loan and deposit growth drove the gains.
The update also made clear that margin pressure remains in play. Net interest margin, which tracks the difference between loan earnings and funding costs, edged down by a few basis points as competition stayed fierce, according to Reuters. (One basis point equals 0.01 percentage point.)
The market’s closed, so the immediate question hangs: is this just a breather following an overloaded trade, or are we seeing the early stages of a shift out of banks if concerns about rates stick?
Investors are already eyeing the RBA’s mid-March meeting, set for March 16–17, as the next big indicator. The focus will be on the decision statement, with particular attention to any updated wording around inflation sticking around.
Here’s one risk that can’t be ignored: inflation hangs around, rates don’t come down, and suddenly, bank valuations take a hit—even if profits don’t falter. Margins get squeezed from both pricier funding and fiercer mortgage competition. Multiples compress, but earnings might not budge.
Westpac lines up its interim results and dividend announcement for May 5, tied to its half-year period ending March 31. Details are on the Westpac website.
Next up: Australia’s February CPI lands March 25, and traders are set to watch those numbers closely.
