Sydney, May 2, 2026, 07:05 AEST
Westpac Banking Corp faces its half-year earnings with investors zeroing in on credit costs, after energy-market turmoil sparked by the Middle East conflict forced the lender to lift provisions and dented Treasury and Markets revenue. Reuters, calling Westpac Australia’s second-largest bank by assets, noted that its provisions for possible bad loans are now sitting at their highest level since the COVID-19 era.
It’s a tricky overlap. Westpac plans to unveil its first-half 2026 numbers at 10 a.m. Tuesday, right as investors are bracing for the Reserve Bank of Australia’s latest rates decision.
Banks rely on the net interest margin—the spread between income from loans and what they shell out for deposits and funding. According to a Reuters poll, 30 out of 33 economists forecast the RBA will lift the cash rate by 25 basis points to 4.35% on May 5. “Inflation is basically too high in Australia,” AMP economist My Bui commented. Over at Westpac, chief economist Luci Ellis described the rate outlook past May as “less certain.” Reuters
Westpac set the tone for the first half in its ASX filing. Lending was up 4%, deposits climbed 3%, and core net interest margin held steady in the second quarter. Productivity gains trimmed expenses by 2%. The bank also pointed to softer Treasury and Markets margin on rate swings, introduced a fresh overlay for energy-intensive sectors, and posted a credit impairment charge equal to 10 basis points of average gross loans.
There’s also the cost of unwinding things. Westpac expects to close the sale of its RAMS mortgage portfolio—buyers include Pepper Money, KKR, and PIMCO—sometime in the second half of 2026. Still, transaction costs coming out of the deal will shave A$75 million off reported net profit after tax.
The peer read-through isn’t straightforward. On Friday, ANZ posted a first-half statutory profit of A$3.65 billion alongside a cash profit of A$3.78 billion. Chief Executive Nuno Matos pointed to “materially better returns” as the bank trims complexity and cuts out duplication. ANZ
NAB is flashing another caution light for the sector. According to Reuters, National Australia Bank anticipates first-half credit impairment charges of A$706 million, along with an estimated 20-basis-point reduction to its common equity tier 1 ratio—a key gauge of core capital to risk-weighted assets.
Westpac faces a tough balance: can gains from loans and trimming expenses make up for weaker markets revenue and bigger provisions for bad debts? Investors are also watching to see if the RAMS charge shows up as a one-off, or if it hints at further clean-up ahead.
But it’s a two-edged sword. Should oil and funding shocks subside faster than anticipated, banks might end up having set aside more provisions than necessary. On the flip side, sticky inflation forcing the RBA to hike rates beyond forecasts would put extra pressure on households and small businesses, potentially eating into those margin gains.
Westpac’s economists are taking a more hawkish line on rates than their rivals. According to Reuters, ANZ, Commonwealth Bank, and NAB all tip the cash rate to top out at 4.35%. Westpac, though, is out in front with a 4.85% forecast, setting up Tuesday’s decision as a midpoint in a sharper debate: just how much more can borrowers take as costs keep rising?
