Australia's second-biggest bank has posted a better-than-expected earnings result, raking in more than $5 billion in a year, but its shares have slipped.
Westpac made $5.7b in net profit for the 12 months to September 30, up four per cent from the year before, the bank announced on Monday.
But revenue was down two per cent to $19.9b and cash earnings - the banking industry's preferred measure of operational strength because it strips out volatile and one-off items - fell one per cent to $5.3b
The cash earnings beat consensus estimates by 3.7 per cent, said E&P Financials banking analyst Azib Khan in a note.
Still at 11.35am AEDT Westpac shares were down 4.3 per cent to $23.10, for the worst performance of any of the big four banks. CBA was even up slightly, by 0.2 per cent.
""I'm very happy with the solid result this year," Westpac chief executive Peter King said
"We've really built liquidity and capital buffers and the credit portfolio is in very good shape, so we feel like the bank is in a solid position to manage through a tougher environment and help customers."
Westpac said it had returned to growth in its key segments of Australian mortgages and business lending.
"We are charting our way through a period of high inflation and rapid increases in interest rates," Mr King said.
The bank was yet to see an increase in hardship or stressed assets, with many customers having built up savings during the past two years and nearly two-thirds ahead on their mortgage repayments.
Mr King said, however, that it was inevitable the impact of higher rates would be felt, particularly when borrowers' low fixed-rate loans roll over onto higher variable rates.
"That will be hard for people, and it's important to acknowledge the challenges ahead as customers navigate the tougher environment," he said.
While consumer spending remains resilient, Westpac expects the "heat" to come out of the economy as higher rates bite.
"Small business is one sector we are watching closely as consumption slows," Mr King said.
Westpac also noted that it expects housing prices to continue to fall in fiscal 2023, which would likely see an easing in credit growth.
Still, the economy remains robust and the bank said it was well-positioned to handle the road ahead.
"Our own portfolio is in good shape going into 2023," Mr King said.
Mr King said Westpac's mortgage business grew slower than its peers over the year, but gained momentum in the second-half.
He was pleased with the roll-out of the Westpac app, which offers improved self-serve capabilities and a less than two-second log-on speed.
Westpac said it was continuing its migration to digital, with the number of Australian branches down 14 per cent over the past two years, to 732, while the number of Westpac ATMs is down 16 per cent to 1,071 over the same period.
Meanwhile, Westpac's number of digitally active customers is up five per cent to 5.48 million, and its digital transactions are up 13 per cent to 356m.
Westpac will pay a final dividend of 64 cents per share, taking the full year payout to $1.25.
WESTPAC'S 'SOLID' 2021/22
* Revenue of $19.9 billion for the 12 months ended September 30, excluding notable items, down two per cent from a year ago.
* Net profit of $5.7b, up four per cent from a year ago.
* Cash earnings of $5.3b, down one per cent
* Final dividend of 64 cents per share, fully franked, from 60 cents a year ago.
