WBC -5.88%: 3Q26 trading update was broadly in line, but the market focused on a clear slowdown in mortgage applications and the prospect of softer housing credit growth into FY27.
Key takeaways:
- Unaudited quarterly NPAT of A$1.8 billion, running slightly below current 2H26 consensus.
- Core NIM of 1.78%, up 1bp quarter-on-quarter.
- Group NIM excluding notable items of 1.89%, around 1bp below 2H26 consensus.
- Credit impairment charges of A$224 million, equivalent to 10bps of average gross loans, broadly unchanged.
- CET1 of 12.1%, down 30bps quarter-on-quarter following the interim dividend and growth in risk-weighted assets.
- The recently completed RAMS mortgage portfolio sale should add around 23bps back to CET1.
The main area of concern was housing. Average monthly mortgage applications have fallen by around 20% since the May budget, with owner-occupier applications down roughly 18% and investor applications down around 26%. Management also expects housing credit growth to moderate into next year.
That said, the margin backdrop remains reasonably supportive. Core NIM improved modestly during the quarter, helped by higher interest rates and liquid assets, while Westpac still has some benefit to come through from its replicating portfolio. Competitive pressure in mortgages remains the offset, and translating solid balance-sheet growth into stronger revenue momentum will be important from here. Credit quality also remains broadly sound. Stage 3 individual impairments increased by around 10% quarter-on-quarter, with some stress emerging in transport and manufacturing, but the overall credit loss ratio remained steady at 10bps.
Capital remains a key part of the story. CET1 is still strong at 12.1%, and the RAMS sale effectively replenishes the capital expected to be used by the remaining buyback. That keeps the broader capital-management story intact, including the potential for further shareholder returns over time.
MM’s view: A steady update rather than a strong one. Margins and credit quality were broadly fine, but the sharp fall in mortgage applications highlights the softer housing backdrop and explains the negative share-price reaction. We continue to own WBC in the Active Growth Portfolio. The earnings outlook is not especially exciting, but capital remains strong, margins are holding up better than feared, and the balance sheet still provides scope for attractive shareholder returns.
MM is mildly positive WBC ~$36
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