Sydney, May 13, 2026, 08:06 AEST
- Westpac finished Tuesday down 1.37% at A$36.61, with pressure spreading across the big banks and the broader financials sector.
- Fresh pressure stems from the federal budget’s shakeup on property taxes: negative gearing gets capped at new construction only, while the 50% capital gains tax discount is scrapped in favor of an inflation-adjusted regime and a 30% minimum tax starting July 2027.
- Capital, dividend yield, and loan growth continue to underpin the stock. Right now, though, the market is probing if mortgage demand, margins, and credit quality can all stay solid at once.
Westpac Banking Corporation heads into Wednesday still battling technical weakness, with the policy backdrop casting a longer shadow. Shares closed Tuesday at A$36.61, a 1.37% drop, after moving in a range from A$36.42 to A$36.94. Roughly 6.08 million shares changed hands. The stock is now off almost 5% since closing at A$38.50 on May 4.
This wasn’t isolated to Westpac; the entire banking sector took a hit. Financials dropped 1.6% on Tuesday as investors dumped shares of ANZ, NAB, Commonwealth Bank, and Westpac, bracing for the federal budget. According to Market Index, jitters centered on possible tweaks to negative gearing and capital gains tax—measures that could dampen appetite for new mortgages. Negative gearing lets investors offset property losses against their taxable income.
This budget locks in the trajectory. Starting July 2027, negative gearing sticks around only for new builds. Anyone with properties purchased before budget night keeps their current setup, but if you buy established housing after budget night, unused losses won’t offset your wages. The 50% capital gains tax discount? That’s shifting to an inflation adjustment, with a new 30% minimum tax on any gains.
The connection is straightforward for Westpac. Mortgages aren’t peripheral for the big four—they’re core business. IG points out that residential mortgages account for roughly 45% to 50% of the major banks’ assets. So, if policies start to put a lid on property-investor appetite, the impact runs through to loan growth, bad-debt risk, and ultimately, what analysts expect from bank earnings.
One detail that stands apart from the policy-driven selling: Westpac’s shares went ex-dividend on May 8, tied to its 77 cent fully franked interim payout due June 26. When a stock trades ex-dividend, new buyers miss out on the dividend, and prices typically drop to reflect that—so the 4.83% slide on May 8 exaggerated the week’s risk-off message in the chart. As for Tuesday, the decline centered more on banks and budget concerns.
There’s ammunition for bulls and bears in the latest earnings numbers. Westpac’s first-half statutory net profit landed at A$3.4 billion—down 5% from the previous half, yet still a 3% lift compared to the same time last year. Excluding notable items, net profit came in at A$3.5 billion. The bank’s CET1 capital ratio hit 12.4%, comfortably topping its 11.25% target.
Chief Executive Anthony Miller called the result steady, not spectacular. “We’ve delivered solid operating momentum while investing for the future,” he said. Miller also pointed out that Westpac has boosted provisions despite customer stress dropping. That sentiment echoes where the market stands: reliable bank, tougher backdrop. Westpac
Bulls point to Westpac’s expansion where it matters. By March 31, customer deposits reached A$745.2 billion and loans climbed to A$890.3 billion. Australian housing loans, excluding RAMS, posted 7% growth over the year. Business lending in Australia jumped 16%. Hardly the signs of a retreating bank.
The bear argument follows quickly. If margins keep shrinking, growth loses its shine. On the latest call, management reported that core net interest margin dipped 4 basis points to 1.78%. That metric—essentially the gap between what the bank makes from loans and what it pays out for deposits and funding—keeps tightening. They flagged that lending margins have slipped as competition stays tough, and projected that lending margins will “continue to edge lower.” Investing
Rates remain in flux. The RBA bumped its cash-rate target up to 4.35% as of May 6—the third hike this year, following moves in February and March. Higher rates sometimes pad bank margins on parts of the loan book, though they also squeeze borrowers and may weigh on new lending. Prediction markets don’t suggest a quick follow-up: Polymarket’s June RBA market priced “No Change” as the top bet, at 79%, while “Increase” trailed at 22%. Reserve Bank of Australia
Banks took a beating. NAB and ANZ slid roughly 2.1% apiece on Tuesday, while CBA and Westpac each lost 1.4%, according to the Market Index wrap. Westpac’s chart isn’t just reacting to its own results; it’s reflecting a broader shift tied to housing, rates, and how investors are valuing lenders.
There’s a flip side for equities in the budget. ABC noted that tweaks to capital-gains rules might nudge some investors to shift money from established property into shares or new housing; RSM Australia economist Devika Shivadekar suggested the move could get Australians thinking about wealth-building options beyond property. Still, Westpac isn’t budging: mortgage demand remains the main lens, not a flood into equities.
The stock isn’t moving much. Bulls highlight capital, dividends, steady deposit growth, and a franchise picking up share. Bears focus on margin pressure, worries about property-investor demand, and an RBA that’s still battling inflation. Tuesday? Sellers moved first.
