Westpac posts $7b profit, launches $1.5b share buyback

"Over the past year we've further strengthened the bank, improved our financial performance and continued to support customers in a rising interest rate environment," chief executive Peter King said in a letter to shareholders.

"A strong banking sector is vital for a resilient economy and Westpac's balance sheet is the strongest I've seen in my 29 years at the bank," he said.

As of September 30 Westpac had a tier one capital ratio of 12.4 per cent, up from 11.3 per cent a year ago and well above of its target ratio of 11 to 11.5 per cent, leaving open the option of more returns to shareholders.

Westpac earned $3.05 billion in profit from its Australian consumer banking operations, down seven per cent from last year. 

The bank's net interest margin, a key gauge of profitability, rose two basis points to 1.95 per cent for the full year.

Westpac exited 10 businesses during 2022/23 and its banking app was recognised by Forrester as the No 1 in the country, Mr King said. 

Rising interest rates and the cost-of-living crunch have resulted in more customers calling the bank, Mr King said, but just 13,000 were in hardship arrangements as of September 30, 69 per cent below a peak hit during the COVID-19 pandemic.

Westpac also has not seen significant increases in customers falling behind on their mortgages, Mr King said. Numbers have been drifting  slightly higher since September 2022, but are still well down from the levels seen two or three years ago. 

That doesn't mean that mortgagors are having an easy road, though, Mr King acknowledged.

"From experience we know customers prioritise paying their mortgage while cutting back their spending elsewhere," he said.

The bank is in a strong position to assist customers, he added.

Mr King predicted that the jobs market would be tested in 2024 but said the bank was broadly positive about the economic outlook for next year.