Westpac Banking Corporation shares (ASX:WBC) surged 6.31% today, hitting the highest point in years at A$36.28 before closing at A$36.04. The bullish move came as the bank released a robust third-quarter earnings report for fiscal year 2025. The strong results, headlined by a $1.9 billion unaudited statutory net profit, significantly boosted market confidence.
The reported net profit represents a 14% increase compared to the average of the first half of FY25. Even excluding notable items related to economic hedges of term funding, which provided a slight benefit, net profit still rose by a healthy 8% to $1.9 billion.
Westpac’s net interest income (NII) saw a 4% increase, primarily attributed to the expansion of its net interest margin (NIM). The bank’s core NIM improved by 0.05% to 1.85%, a key driver of the positive earnings surprise.
Market sentiment was further buoyed by strong customer deposit growth of $10 billion and gross loan growth of $16 billion. Specifically, Australian housing loans grew by 1%, business loans by 5%, and institutional loans by 2%.
A 6% increase in non-interest income, fueled by stronger markets revenue, also contributed to the impressive quarterly performance. However, expenses also increased by 3%, primarily driven by wage and salary growth.
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Westpac’s Common Equity Tier 1 (CET1) capital ratio stood at a comfortable 12.3% at the end of the quarter, well above the bank’s target operating range of 11.0% to 11.5%. Furthermore, as of June 30, the bank had completed 71% of its $3.5 billion on-market share buyback program.
However, it’s worth noting that Westpac reported credit impairment provisions of $5.1 billion as of June 30. This figure is $1.9 billion above the bank’s base case expected losses, a potential risk factor to monitor.
“We grew strongly in business and institutional banking, while focusing on returns in Consumer and improving customer experience,” said CEO Anthony Miller, commenting on the results that propelled Westpac shares higher.
Westpac’s recent performance follows a period of consolidation. Over the past month, WBC shares have risen 7.39%, with much of that coming today. Moving out to 1 year however and the increase is a more impressive 24.92%. Westpac currently trades at a price/earnings ratio of 18and a price/book of 1.53, which is at a premium compared to peers like ANZ but below CBA.
The stock is now trading at levels not seen in nearly a decade, with WBC having bounced, whilst peers have bundled.
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