Westpac (ASX:WBC) Shares Face FY26 Results With Margin Pressure

Westpac Banking closed at A$37.19 on 2 November, after the market had a full day to digest its FY 2026 result. On the surface, the stock has held up reasonably well in recent weeks, yet the fresh numbers tell a more complicated story for long term holders.

The real headline is pressure on profitability. Net interest margin for the first half sat at 1.89% while the cost to income ratio was 51.67%. This points to a business working hard just to protect return on every A$ of lending. For anyone thinking beyond today’s move, that margin squeeze is the figure to watch.

Love Westpac Banking’s scale and dividend profile but uneasy about a 1.89% net interest margin and a 51.67% cost to income ratio squeezing profitability. If you want banks and financials with sturdier economics, check out our list of solid balance sheet and fundamentals stocks (12 results)

FY 2026 Earnings Summary

• Total Revenue (FY 2026 vs FY 2025, trailing 12 months): A$21,738 million vs. A$21,960 million (broadly stable top line)
• Net Income, Excl. Extra Items (FY 2026 vs FY 2025, trailing 12 months): A$6,813 million vs. A$6,910 million (largely unchanged profit level)
• Basic EPS (FY 2026 vs FY 2025, trailing 12 months, trailing 12 months): A$1.993 vs. A$2.019286 (slight EPS easing year on year)
• Net Interest Margin & Cost to Income Ratio (FY 2026 vs FY 2025, trailing 12 months): 1.89% NIM and 51.67% cost to income vs. 1.94% NIM and 53.04% cost to income (tighter lending spread with marginally leaner cost base)

Westpac trades above a DCF value yet near peer P/Es. Ask Charlie what Westpac’s valuation premium really reflects.

Westpac bullish thesis tested against FY26 delivery

The upbeat story here hangs on Westpac Banking turning cost programs into a structurally leaner franchise rather than a one off fix.

"Consistent progress on productivity programs, including the UNITE program and a targeted more than A$550 million of structural savings in FY26, points to a leaner operating base that can support net margin and earnings outcomes if revenue holds or grows."

FY26 numbers partly tick that box. The cost to income ratio of 51.67% and broadly stable A$21,738m revenue show expense work helping to offset credit charges and margin pressure. Profit and EPS sitting roughly flat against FY25 suggest the productivity “engine” is running, but not yet lifting earnings.

That disagreement has a full argument behind it. → Uncover the lower Fair Value this Narrative argues for.

Westpac bearish case leans on credit drag

The sceptical view hinges on stressed sectors turning into a real hit to Westpac Banking’s earnings and capital.

"Increases in stressed exposures in property, utilities, manufacturing, transport and discretionary related sectors, along with higher overlays and downside severity assumptions, raise the likelihood of higher future credit impairment charges that can pressure earnings and capital efficiency."

FY26 profit of A$6.9b sitting only broadly in line with guidance, while loan growth runs at 5%, already shows higher credit charges biting into what would otherwise be a cleaner result. The June quarter profit easing to A$1.8b on flat income, and a softer CET1 trend, both support this risk rather than counter it.

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