Why S&P/ASX 200 Banking Rivals ANZ (ASX:ANZ) and Westpac (ASX:WBC) Make a Compelling Comparison

In the six months to 31 March 2026, ANZ Group Holdings (ASX:ANZ) booked Operating Income of $11,204 million (A$). Westpac Banking Corporation (ASX:WBC) reported $11,284 million, excluding notable items. Two banks with almost identical Revenue took very different routes to get there, and that is what makes the pair useful to compare.

Both are in the middle of multi-year overhauls. ANZ is cutting costs and absorbing Suncorp Bank, while Westpac is simplifying its technology through a programme called UNITE and growing loans faster than the market. Because both have 30 September year-ends, their half-year numbers cover the same period, which is rare in bank comparisons.

Two resets running at different speeds

ANZ's 1H26 results release, published on 1 May 2026, showed cash profit of $3,780 million, up 14 per cent on the prior half after excluding that half's significant items. Operating expenses fell 9 per cent on the same basis to $5,534 million, and ANZ said 78 per cent of 3,500 announced roles had left the bank by the end of April 2026.

Chief executive Nuno Matos said the result "confirms our actions to reset the bank are working". ANZ has told shareholders it expects gross cost savings of $800 million in FY26, alongside $500 million of estimated Suncorp synergies.

Westpac's 1H26 ASX release, issued on 5 May 2026, reported statutory net profit of $3,414 million and net profit excluding notable items of $3,483 million, up 1 per cent on 1H25. Total loans rose 7 per cent over the year to $890.3 billion, and Australian mortgages excluding RAMS grew at 1.2 times system. Chief executive Anthony Miller said: "Getting UNITE done will help unlock the potential of this organisation."

Where the Margin gap comes from

Net interest margin, or NIM, is the difference between what a bank earns on loans and what it pays for deposits and wholesale funding, as a share of interest-earning assets. ANZ's group NIM was 1.53 per cent in 1H26, down one basis point, although its NIM excluding Markets rose two basis points, according to chief financial officer Farhan Faruqui's briefing.

Westpac's interim financial results showed a NIM of 1.89 per cent, down six basis points on 2H25, with core NIM down four basis points to 1.78 per cent. Westpac attributed tighter Loan spreads in Australia to competition.

The headline gap needs context. ANZ runs a large institutional and Markets business, which typically adds interest-earning Assets at thinner margins and pulls group NIM down. Westpac is weighted more towards Australian consumer and Business lending, funded by customer deposits that rose 7 per cent over the year to $745.2 billion. Unadjusted, the NIM comparison overstates any difference in pricing power.

By our calculation: costs and franking side by side

With operating income within $80 million of each other, costs become the cleaner point of difference. ANZ's reported cost-to-income ratio (operating expenses divided by operating income) was 49.4 per cent. Westpac's was 51.67 per cent excluding notable items. By our calculation, Westpac spent about $296 million more to generate similar revenue in the half.

Returns point the same way, with a caveat on definitions. ANZ reported a cash Return on Equity of 10.6 per cent; Westpac reported 9.6 per cent, or a return on tangible equity of 11.0 per cent excluding notable items.

Dividends show a different contrast. ANZ declared an 83-cent interim Dividend franked at 75 per cent, up from 70 per cent. Westpac declared 77 cents, fully franked.

Franking credits pass on company tax already paid, at a 30 per cent rate. By our calculation, ANZ's dividend carries franking credits of about 26.7 cents (83 × 0.75 × 30/70), for a grossed-up value near 109.7 cents. Westpac's carries about 33.0 cents, grossing up to roughly 110.0 cents. For an investor able to use franking credits in full, the two interim payments were close to equal before share price differences.

Credit quality and Capital cushions

Both banks reported benign credit. ANZ's individual provision charge was $148 million, an annualised loss rate of four basis points, with Australian Mortgage delinquencies of 83 basis points. Westpac's total Impairment charge was $443 million, or 10 basis points of average gross loans. These are not like-for-like: ANZ's figure excludes collective provision movements, while Westpac's is the total charge.

Common equity tier 1 (CET1) capital is the highest-quality buffer banks hold against risk-weighted assets. The two were almost level at 31 March 2026. Westpac's third-quarter investor discussion pack, covering the three months to 30 June 2026, showed CET1 of 12.1 per cent, NIM steady at 1.89 per cent, net profit of about $1.8 billion and a deposit-to-loan ratio of 84.1 per cent.

Execution risks on both sides

ANZ's main risks are delivery and growth. Its Australian home loans grew $5 billion in the half, which management described as below system, and business bank growth was "mixed". On 7 September 2026, ANZ said Suncorp Bank customers had begun receiving migration correspondence, with the move to ANZ systems due to finish by June 2027. A large customer migration carries operational and reputational risk.

Westpac's risk is margin. It is winning volume, but its core NIM fell four basis points in a half largely because of competition. UNITE is also a long, complex programme. Its 15 September 2026 Data, Digital and AI update said AI-enabled work had brought forward the St George data Warehouse migration by two years, but gave no new financial targets.

What each full-year result needs to show

Both banks report FY26 results for the year to 30 September 2026 after the research date. For ANZ, the tests are whether expenses fall about 5 per cent in FY26, as management guided in May, and whether its ex-Markets margin improves as the CFO indicated. For Westpac, the tests are whether 3Q26's margin stability holds and whether cost growth stays contained while UNITE absorbs investment.

Both remain S&P/ASX 200 constituents and were unaffected by the September 2026 index rebalance. With revenue, capital and grossed-up dividends this close, differences in cost delivery, margin and execution are likely to drive how their results diverge.