Westpac Banking Corporation (ASX:WBC) provides consumer, Business and institutional banking services across Australia and New Zealand. Its Q3 FY26 update showed higher quarterly profit, continued Loan and deposit growth and a broadly stable net interest margin. Capital declined during the quarter because dividends and higher risk-weighted Assets absorbed earnings, although the subsequent RAMS portfolio sale provided an offset.

Quarterly Profit Reaches A$1.8 Billion

Westpac reported unaudited net profit excluding Notable Items of A$1.8 billion for the three months ended 30 June 2026, up 2% on the 1H26 quarterly average. Statutory net profit was also A$1.8 billion.

Net Operating Income increased 1% to A$5.7 billion, while operating expenses increased 1% to A$2.9 billion. Pre-provision profit was A$2.8 billion and return on tangible Equity reached 11.4%.

Net Interest Margin Holds at 1.89%

Group net interest margin was 1.89% in Q3 FY26, compared with 1.84% in Q2 and 1.94% in Q1.

Core NIM was 1.78%, one basis point above Q2. Higher interest rates and returns on Liquid assets supported the margin, while lending competition, deposit mix and increased use of bonus-rate savings products offset part of the benefit.

Treasury and Markets contributed 11 basis points to group NIM.

Loans and Deposits Continue to Increase

Gross lending increased 2% during the quarter. Australian business lending increased 4%, Institutional lending rose 3% and housing lending increased 2%.

Deposits also increased 2%, supported by transaction and term balances.

Gross loans reached A$908 billion at June 2026, while deposits reached A$759 billion. Both were 7% higher than a year earlier.

Mortgage Applications Moderate

Westpac reported a reduction in average monthly Mortgage applications during the period.

Applications were around 29,000 per month during Q3 FY26 and approximately 26,000 in the post-budget run rate measured from 15 May to 31 July.

At the same time, Westpac Economics expects Australian housing Credit growth to moderate from 6.8% in FY26 to 4.7% in FY27.

The forecast does not represent Westpac-specific lending guidance.

CET1 Ratio Falls to 12.1%

Westpac’s Level 2 CET1 capital ratio declined from 12.4% at March 2026 to 12.1% at June.

The ratio remained above the bank’s 11.25% target for normal operating conditions.

Quarterly Earnings added capital, but this was more than offset by payment of the FY26 interim Dividend and growth in risk-weighted assets.

Risk-weighted assets increased A$6.2 billion to A$464.5 billion.

RAMS Sale Adds Capital Capacity

Westpac completed the sale of its RAMS mortgage portfolio on 1 August 2026.

The transaction reduced the home-loan portfolio by A$15.4 billion and was expected to add 23 basis points to the CET1 ratio.

The bank also noted that the remaining portion of previously announced share buy-backs would consume approximately 22 basis points of capital.

These items will influence the capital position reported at the full-year result.

Credit Provisions Increase

Expected-credit-loss provisions increased to A$5.298 billion from A$5.199 billion at March 2026.

Total provisions remained equivalent to 58 basis points of gross loans.

Impairment charges were 10 basis points of average gross loans and included higher portfolio overlays and an increase in the severity assigned to the downside economic scenario.

Westpac held approximately A$2.0 billion of provisions above losses implied by its base-case scenario.

Mortgage Delinquencies Remain a Key Measure

Australian mortgage 90+ day delinquencies were 0.58% at June 2026, while 30+ day delinquencies were 1.14%.

Stressed exposures increased three basis points to 1.19% of total committed exposure.

Mortgage hardship balances were 0.55%.

These metrics will remain relevant as borrowers adjust to interest rates and changing household expenses.

UNITE Transformation Continues

Westpac continued progressing its UNITE technology and operating-platform program during the quarter.

Commercial Banking customer migration commenced, all Westpac Invoice Finance facilities were moved to the new platform and enterprise data migration to the cloud was completed.

The program is intended to simplify systems and support productivity, data use and customer servicing over time.

FY26 Result Is the Next Major Update

Westpac is scheduled to release its FY26 full-year result on 2 November 2026.

The result will provide an updated CET1 position following the RAMS transaction and buy-back activity, as well as full-year information on margins, credit quality and operating expenses.

Mortgage volumes, deposit competition and progress on UNITE will also remain relevant to the FY27 outlook.

Key Risks and Areas to Watch

Competition in mortgages and deposits can affect net interest margins, while slower housing-credit growth may reduce lending momentum. Credit quality could also change if household or business conditions deteriorate.

Capital must continue to absorb dividends, lending growth and buy-backs. Margin trends, mortgage applications, provisions and the post-RAMS CET1 ratio will therefore remain important indicators at the FY26 result.