Westpac faces earnings pressure despite strong asset base: Moody’s

Its NPL ratio has improved and its deposit base is stable.

Westpac Banking Corporation shows a very strong asset quality with low levels of problem loans and a robust funding profile, according to Moody’s Ratings.

However, similar to NAB, Westpac’s earnings growth will remain a challenge for 2026 on the back of competitive pressures on lending and deposits, combined with its rising operating and investment costs.

The bank’s non-performing loans (NPL) ratio was 1.1% as of September 2025, improving from 1.3% a year earlier. This highlights the improving outlook for asset quality as interest rates have declined whilst employment conditions remain strong, according to Moody’s.

Westpac also reported a decline in 90+ days home loan delinquencies, which stood at 0.73% of gross mortgage loans at September 2025 compared to 0.86% at March 2025 and 1.12% at September 2024.

The proportion of customers in hardship had also reportedly declined to 0.53%, from 0.76% previously.

Funding profile is strong and backed by its retail and business customer deposit base, Moody’s said in its ratings report, where it affirmed Westpac’s Aa2 senior unsecured ratings and gave the bank a stable outlook.

It is also supported by its wholesale market funding. During FY2025, 76% of Westpac’s wholesale issuance had a tenor of 5 years and above.

Liquidity profile is reportedly strong, with an average liquidity coverage ratio (LCR) of 137% for the quarter ending September 2025.

“Westpac's liquidity profile is supported by the stability of its deposit base, which results in very low modelled outflows. Eligible high quality liquid assets for regulatory purposes in Australia are of very high quality and exhibit very strong liquidity characteristics,” Moody’s wrote.