---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 268777
conversation_id: 6a67744d-5581-4ceb-ae3f-baa477723fd7
citations: 20
created: 2026-05-31 19:40:28Z
---

# Provide a one‑year narrative of Westpac, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# Westpac Banking Corporation (WBC AU) — One-Year Narrative (June 2025 → May 2026)

A year that opened with a freshly installed CEO trying to convince the market that a balance-sheet-led growth pivot and a sweeping technology simplification (UNITE) could close a structural ROTE/cost gap with peers. The narrative arc moved from skepticism (sell-side underweight, "over-valued in the near term") to a tentatively endorsed turnaround story — only to be challenged in May 2026 by a Middle East conflict that re-priced credit risk and forced a new portfolio overlay.

---

## 1. June 2025 — Starting Position: New CEO, Under-Loved by the Street

Anthony Miller had been in the CEO chair since December 2024. The 1H25 result (six months to 31 March 2025, reported 5 May 2025) framed the narrative:

| 1H25 Metric | Value | YoY Move |
|---|---|---|
| Statutory net profit | **A$3,317m** | **down 1%** [24] |
| Net profit ex Notable Items | A$3,457m | down 4% [1] |
| ROTE ex Notable Items | 11.1% | **‑34 bps** [1] |
| Interim dividend | 76¢ fully franked | flat [3] |
| CET1 | 12.24% | -31 bps [1] |
| Loans / Deposits | A$825bn / A$697bn | +2% / +3% HoH [3] |

Westpac was already deep into its A$3.5bn on-market buyback — 17.7m shares cancelled in 1H25 at an average price of **A$31.92** [2] — and shareholders received A$2.6bn via the franked interim dividend [3]. The macro backdrop turned at the very end of the half, when **"relief finally arrived late in the First Half 2025 when the RBA cut rates for the first time in almost five years"** after the cash rate had climbed from 0.10% in Nov-2020 to 4.35% by Nov-2023 [4].

### The Sell-Side View Going Into Mid-2025

CLSA's 20 June 2025 sector note "Australian banks — ANZ the one to watch" set the tone for investor sentiment:

| Bank | CLSA Rec | Price | Target | Up/Downside |
|---|---|---|---|---|
| ANZ | O-PF | A$28.39 | A$31.20 | +9.9% |
| NAB | — | A$38.91 | A$33.90 | (12.9%) |
| **WBC** | **U-PF** | **A$33.21** | **A$27.50** | **(17.2%)** [5][8] |
| CBA | — | A$182.53 | A$143.00 | (21.7%) |

CLSA's order of preference was explicitly **ANZ > NAB > Westpac > CBA**, sector Underweight [7-source long_summary not citable; thesis surfaced via 6]. The bear case on Westpac had three legs [6]:

1. **No replicating-portfolio tailwind in FY26** because of a shorter hedge duration than peers — "a material headwind relative to peers" [7].
2. **Cost growth ~4% in 2H25** from amortisation, investment spend (+A$70-110m) and salary annualisation.
3. **UNITE benefits delayed to FY28-29**, with investment dragging on costs in the interim.

But CLSA also conceded the soft tailwinds: "WBC's share price has performed well and the **new CEO well liked by the market**… we do however expect short term positive 3Q25 margin tailwinds to watch for" and ~A$1.1bn of buyback still in reserve [6]. The investment thesis: *"WBC is shifting more towards business lending which is a positive, although we anticipate earnings headwinds which include the impact of expected rate cuts and elevated costs while WBC continues to work through project Unite"* [7].

---

## 2. November 2025 — FY25 Result: Decent Growth, Stubborn Cost Gap

Westpac's full-year 30 September 2025 result crystallised the gap-to-peers narrative:

| FY25 Metric | Value | vs FY24 |
|---|---|---|
| Net profit ex Notable Items | **A$7.0bn** | down 2% [10] |
| ROTE ex Notable Items | 11.0% | -24 bps [10] |
| Cost-to-income ratio ex Notable Items | **53.0%** | **+3 ppts** [10] |
| CET1 | 12.5% | +4 bps [10] |
| Customer deposits | A$723bn | +6% [10] |
| Loans | A$856bn | +7% [10] |
| FY25 ordinary dividends | 153¢ | +1% [10] |

The "Measuring Progress" KPI table laid bare what the market was paying for — and against. Westpac's cost-to-income ratio was **3.7 ppts above peers**, and ROTE was **1.5 ppts below peers**, with the Sep-29 target being to close both gaps [9]. UNITE cumulative spend had reached **A$807m** [9]. The dual message — operating momentum yes, but structurally still a discount franchise — kept the stock trading on a relative-value pair against ANZ/NAB rather than as a re-rating candidate.

---

## 3. January 2026 — The "Inaugural Quarterly Call"

In a clear signal of Miller's transparency push, Westpac held its **first-ever quarterly update** for Q1 FY26 [11]:

- Net profit ex Notable Items **+5%** vs the 2H25 average; revenue +1%; NII +2% [11].
- Loans up A$22bn; **institutional lending +7%**, mortgages (ex-RAMS) +3% (running at 1.x system) [12].
- **NIM 1.94%**, down only 1 bp.
- Deposit hedge increased by A$15bn to A$92bn — telegraphing through-the-cycle earnings stability.
- **RAMS transaction on track to settle by mid-year, with an expected A$16bn mortgage reduction** [12] — a strategic decision to shed a sub-scale brand and free up capital (worth ~22 bps of CET1 in 2H26).
- A$18bn of long-term wholesale funding issued since Oct-25.

Less reassuringly, the quarter coincided with the departure of two senior technology leaders — **"obviously, you've had 2 senior leaders in the IT area depart in recent weeks, which coincides with an important part of the Unite project"** (Matthew Wilson, Jarden) [13]. CFO Nathan Goonan downplayed the issue (Scott Collary's retirement managed gradually; Peter Herbert continued running UNITE; David Walker departure absorbed) but it injected delivery-risk concern into the narrative right at the inflection where UNITE was supposed to start producing visible milestones.

---

## 4. March 2026 — UNITE Market Update: Setting the Cost-Out Clock

On 25 March 2026, Westpac held a dedicated UNITE market update with CEO Miller and Chief Transformation Officer Peter Herbert. The disclosures were granular and largely well-received:

- **Q1 spend A$195m, FY26 guidance A$850-950m**, on track [14].
- UNITE to be **~40% of annual investment spend in FY27-28**, stepping down in FY29 [14].
- **57 initiatives total: 8 complete, 38 green, 7 amber, 1 red** (Debit Card Simplification) — versus 5 red / 13 amber / 20 green back in November 2025 (Jon Mott, Barrenjoey, observed the improvement).
- **First large-scale migration delivered**: ~300,000 wealth accounts and A$150bn of funds onto a single BT Panorama platform [15].
- **One Commercial Bank** announced — consolidation of St George/BankSA/Bank of Melbourne business banking onto the Westpac stack, target completion Dec 2027.

The crucial framing for sentiment was Miller's reiteration that **material cost benefits would land in 2H28 / FY29** — i.e., investors had to underwrite years of cost drag for back-loaded payoff. The March update reduced execution-risk skepticism but did not change the timing-of-payoff debate that had kept the sell-side cautious.

---

## 5. May 2026 — 1H26: Operating Momentum Meets the Middle East Shock

The half ended 31 March 2026 (reported 5 May 2026) was Miller's clearest "we're delivering" moment — and his first real test of resilience:

| 1H26 Metric | Value | vs 2H25 / 1H25 |
|---|---|---|
| Revenue | **A$11,293m** | **up 5%** [20] |
| Statutory net profit | A$3,414m | down 5% / **up 3%** [20] |
| Net profit ex Notable Items | A$3.5bn | down 1% / up 1% |
| ROE | 9.6% | down 31 bps / up 16 bps [19] |
| ROTE ex Notable Items | 11.0% | up 14 bps / down 7 bps [19] |
| CET1 | **12.4%** | above 11.25% target [19] |
| **Interim dividend** | **77¢** (fully franked) | **+1¢** [16] |
| Loans / Deposits | A$890bn / A$745bn | **both +7% YoY** [18] |
| Stressed exposures / TCE | 1.16% | down 12 bps on Sep-25 [19] |

Miller opened the result with **"I'm pleased with our progress this half. And we're starting to see operating momentum build across the bank"** [17]. The growth numbers backed it up: **Australian housing loans (ex-RAMS) +7%**, **business lending +16%**, **institutional balance sheet +23%** [18]. Cost discipline showed too: operating expenses 6% lower (2% lower ex the 2H25 restructuring charge).

### The Twist — Middle East Conflict and the Energy Overlay

The same result introduced the new macro risk into the WBC story. Miller's letter was titled **"Disciplined execution through global unrest"**. Management took explicit action on credit:

> "The revised economic outlook has been reflected in our base case provision scenario and **a new portfolio overlay has been added for energy intensive sectors**. **Credit impairment provisions increased to $5.2 billion** and the ratio of collectively assessed provisions to credit RWA were higher at 1.29%." [19]

UBS analyst John Storey pressed the point on the call: "Westpac's definitely got one of the more bearish views on the underlying economy in your forecasts." Brian Johnson (MST) flagged that WBC's housing loss rate (9 bps overall, 1.8 bps gapping up on investor) was running above peers reporting near zero — Goonan offered to take the comparison offline.

### Strategic Execution Signals

- **Westpac app now drives 6.8m daily logins**; AI-driven fraud detection prevented A$181m in scam losses; #1 Australian banking app for the 3rd year running [21].
- **BizEdge platform processed >A$10bn in new business lending, time-to-decision improved 49%** [22].
- **One Commercial Bank** customer migration brought forward ahead of the originally planned July start [22].
- New end-to-end operating model "**catalyst**" announced — moving from "hundreds of annual projects to 20 delivery units."
- **Westpac intelligence layer** ("data and AI across the bank to support faster, safer and more proactive decision making") [23] positioned as the AI productivity story for investors who were starting to ask whether AI could shorten UNITE's payoff timeline.

---

## 6. How Sentiment & Valuation Shifted Across the Year

| Phase | Sentiment Driver | Stock Implication |
|---|---|---|
| **Mid-2025** | CEO honeymoon vs sell-side underweight (target A$27.50 vs price A$33.21 implied -17.2%) [5][6] | Trading rich on CEO premium; sector Underperform call |
| **Sep–Nov 2025** | FY25 print: revenue/loan growth solid, but **CTI gap widened to 3.7 ppts** and ROTE 1.5 ppts below peers [9] | "Show me the cost-out" narrative; relative-value pair vs ANZ/NAB |
| **Jan–Feb 2026** | Inaugural Q1 call: NIM resilient, RAMS exit on track, two senior IT departures muddy delivery confidence [11][12][13] | Transparency credit, but tech-leadership churn re-introduced risk |
| **March 2026** | UNITE update: 8/57 initiatives done, traffic-light scorecard improved, A$195m Q1 spend within plan [14][15] | Execution risk discount reduced; payoff still back-ended to FY29 |
| **May 2026** | 1H26 beat (PoP) and dividend hike to 77¢, **but +energy-sector overlay and A$5.2bn provisions on Middle East conflict** [19] | Operating momentum endorsed; credit-cycle re-pricing replaces transformation as primary risk |

The thread running through it is **Miller's promised "disciplined execution"** being progressively validated on operational and customer KPIs (NPS gains, app awards, digital sales, market-share in business banking up via Bizedge, 13% business lending growth) while the structural valuation overhang — CTI gap, FY26 replicating-portfolio headwind, UNITE payoff back-loaded to FY28-29 — kept the stock trading on a "prove it" multiple rather than a re-rating multiple.

By the May 2026 result, the Middle East shock had effectively replaced the transformation-risk skepticism as the central debate: investors who once asked **"will UNITE pay off in time?"** were now asking **"how cyclical is the credit-quality bottom?"** Westpac's pre-positioning (deposit hedge expansion to A$92bn, +A$15bn during Q1; explicit energy-sector overlay; RAMS divestiture freeing 22 bps of CET1) gave Miller credibility on resilience — the CET1 buffer of A$2.7bn above the 11.25% target [19] preserved capacity to keep buying back stock and grow the dividend (77¢ interim, +1¢) even into the more uncertain second half outlook.

---

## Sources

[1] Westpac 1H25 Interim Financial Results — performance overview (5 May 2025)
[2] Westpac 1H25 Interim Financial Results — buyback note (5 May 2025)
[3] Westpac 1H25 Interim Financial Results — shareholder returns (5 May 2025)
[4] Westpac 1H25 Interim Financial Results — outlook & RBA rate-cycle context (5 May 2025)
[5] CLSA — *Australian banks (ANZ the one to watch)* — WBC summary table, 20 Jun 2025 (607962478LinqAlpha.PDF)
[6] CLSA — *Australian banks*, "WBC: Underperform" thesis section, 20 Jun 2025
[7] CLSA — *Australian banks*, Investment thesis — WBC AU, 20 Jun 2025
[8] CLSA — *Australian banks*, Major bank target prices table, 20 Jun 2025
[9] Westpac 2025 FY Results Presentation — "Measuring Progress" KPI table (Nov 2025)
[10] Westpac 2025 FY Results Presentation — FY25 Financial Performance dashboard (Nov 2025)
[11] Westpac Q1 FY26 Update — inaugural quarterly call, opening remarks (Feb 2026)
[12] Westpac Q1 FY26 Update — lending, RAMS, hedge & funding commentary (Feb 2026)
[13] Westpac Q1 FY26 Update — Jarden Q&A on IT leadership departures (Feb 2026)
[14] Westpac UNITE Market Update — Q1 spend & FY26 guidance (25 Mar 2026)
[15] Westpac UNITE Market Update — Panorama wealth migration milestone (25 Mar 2026)
[16] Westpac 2026 Interim Results Announcement — dividend table (5 May 2026)
[17] Westpac 1H26 Earnings Call — CEO Anthony Miller opening (5 May 2026)
[18] Westpac 2026 Interim Results — growth in core markets & balance-sheet table (5 May 2026)
[19] Westpac 2026 Interim Results — provisions, ROE, energy-sector overlay (5 May 2026)
[20] Westpac 2026 Interim Results — Appendix 4D results table (5 May 2026)
[21] Westpac 1H26 Earnings Call — app, fraud prevention, customer digital (5 May 2026)
[22] Westpac 1H26 Earnings Call — One Commercial Bank & BizEdge (5 May 2026)
[23] Westpac 1H26 Earnings Call — AI / Westpac intelligence layer (5 May 2026)
[24] Westpac 1H25 Interim Results — Appendix 4D results table (5 May 2025)

## Citations

- [1] **Westpac Banking Corporation interim_report 2025-05-05** · external
- [2] **Westpac Banking Corporation interim_report 2025-05-05** · external
- [3] **Westpac Banking Corporation interim_report 2025-05-05** · external
- [4] **Westpac Banking Corporation interim_report 2025-05-05** · external
- [9] **03017872_removed.pdf** · external
- [10] **03017872_removed.pdf** · external
- [11] **Westpac Banking Corporation, Q1 2026** · external
- [12] **Westpac Banking Corporation, Q1 2026** · external
- [13] **Westpac Banking Corporation, Q1 2026** · external
- [14] **Westpac Banking Corp., Investor Meeting - UNITE, 25-March-2026 6** · external
- [15] **Westpac Banking Corp., Investor Meeting - UNITE, 25-March-2026 6** · external
- [16] **Westpac Banking Corp., Q2 2026 Earnings Call, 4-May-2026 8** · external
- [17] **Westpac Banking Corporation, H1 2026 Report** · external
- [18] **Westpac Banking Corporation, H1 2026 Report** · external
- [19] **Westpac Banking Corporation, H1 2026 Report** · external
- [20] **Westpac Banking Corporation, H1 2026 Report** · external
- [21] **Westpac Banking Corp., Q2 2026 Earnings Call, 4-May-2026 8** · external
- [22] **Westpac Banking Corp., Q2 2026 Earnings Call, 4-May-2026 8** · external
- [23] **Westpac Banking Corp., Q2 2026 Earnings Call, 4-May-2026 8** · external
- [24] **Westpac Banking Corporation interim_report 2025-05-05** · external

