Westpac Banking Corp (ASX: WBC) shares are starting the week in the red.
In morning trade, the banking giant's shares are down 1.5% to $38.12.
This follows the release of the bank's FY 2025 results before the market open.
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Westpac shares fall on results day
For the 12 months ended 30 September, Westpac reported a 3% increase in net interest income to $19.473 billion. This reflects a 3% lift in average interest-earning assets.
Management advised that its loans increased 6% to $851.9 billion. This includes growth in Australian housing loans of 5% or at 0.8x system, business lending growth of 15%, and institutional lending growth of 17%.
Westpac's customer deposits grew 7% to $723 billion. This includes 10% in consumer deposits.
Offsetting some of this growth was a 1 basis point decline in its net interest margin (NIM) to 1.94%. This reflects persistent competition in lending and deposits. However, it was ahead of the consensus estimate of 1.93%.
Non-interest income increased 5% to $2.991 billion for the 12 months. This includes an increase in income from wealth management and markets and higher fee income.
One item heading in the wrong direction was its operating expenses, which increased 9% to $11.916 billion. Management notes that this includes restructuring costs of $273 million. Excluding this, expenses rose 6%, reflecting technology and UNITE program costs, increased software amortisation, and salary and wage growth, including an investment in more bankers.
This ultimately led to Australia's oldest bank reported a pre-provision profit of $10.548 billion. This was down 2.5% year on year but largely in line with the consensus estimate of $10.576 billion.
Westpac's net profit after tax was down 1% to $6.989 billion for FY 2025. This was ahead of the consensus estimate of $6.924 billion.
Despite its profit decline, the Westpac board elected to increase its full year dividends by 1% to 153 cents per share. This includes a 77 cents per share fully franked final dividend.
Management commentary
Westpac's CEO, Anthony Miller, was pleased with the bank's performance in FY 2025. He said:
This has been a solid year at Westpac and I'm pleased with the result we are delivering today. With a very strong balance sheet and momentum in our target segments, the opportunity to deliver more for our customers, people and shareholders is exciting. We're focused on relentless execution of our strategy and delivering every day for our customers.
We've managed margins in a competitive environment and our capital position is strong, providing us with plenty of flexibility as we execute our strategy. It was pleasing to see APRA recognise the work we've done to improve risk culture, lifting its enforceable undertaking and removing the additional capital overlay. Strong risk management is not a destination, it's a discipline. We are focused on making it our differentiator.
RAMS sale
In other news, the bank revealed that it has entered into an agreement to sell its $21.4 billion RAMS mortgage portfolio to a consortium which includes Pepper Money Ltd (ASX: PPM), KKR, and PIMCO.
The company notes that the sale is at a slight premium to the gross loan value of the portfolio to be transferred at completion. However, after transaction costs and other adjustments, a loss on sale is expected.
Commenting on the sale, Miller said:
This transaction will significantly streamline Westpac's mortgage operations, reduce run costs across the business and provide further strategic flexibility. Importantly, RAMS customers can continue managing their loans through the RAMS app, website, and call centre and do not need to do anything following today's announcement.
