Westpac New Zealand’s full-year profit fell 9% to $1,087 million, down from $1,197 million in the year to September. Before anyone reaches for the word “slump”, look at why. Net interest margin, the gap between what the bank earns on loans and pays on deposits, fell to 2.23% from 2.32%. Westpac blames “intense competition, particularly for new home lending”. In plain terms, borrowers were paid away from the bank’s bottom line.
For anyone who sat through the 2024 and 2025 bank-bashing, this is the outcome politicians said they wanted. It arrived through rivals undercutting each other on price, not through a select committee.
The statutory number is uglier
The headline figure is the bank’s preferred one. Westpac’s formal Disclosure Statement reports statutory net profit after tax of $1,036 million, down 14% from $1,203 million. Interest.co.nz led with that harsher number. Neither figure is wrong, but the gap is a useful reminder that press releases and regulatory filings are written for different audiences. Read the filing.
On either measure, the direction is the same. Net operating income was flat, pre-provision profit fell 5% to $1,542 million, and operating expenses rose 4% to $1,532 million as the bank kept spending on technology.
Giving back an unusually fat 2025
Context matters. In 2025, Westpac’s profit jumped 13% to $1.20 billion as its margin widened 15 basis points, helped by borrowers sitting on pricier floating and short-term rates while waiting for cuts. At the time, NBR described competition among the big four as “hot”, but the margins said otherwise.
This year’s 2.23% margin is still above the 2.11% Westpac posted in 2023, when profit fell 18% to $963 million and stressed exposures climbed to 1.49% of the book. That was a genuine credit squeeze. This is a partial give-back of a very good year.
Credit quality isn’t the problem
The impairment line moved from a $44 million benefit to a $33 million charge, a $77 million swing that accounts for a chunk of the fall. Against gross loans of $112 billion, it is noise.
Chief executive Catherine McGrath says the median home loan customer is nearly 11 months ahead on repayments and stress among business borrowers is lower than a year ago. Her outlook: “we think there are better times ahead.”
The real fight is for business customers
The more interesting detail is where Westpac is growing. Home lending rose 4% to $74.5 billion, lagging the market’s 5.4%, so the bank lost mortgage share. Business lending rose 6% to $36.3 billion.
“SMEs are the engine room of the economy and we’re backing them to succeed,” McGrath told RNZ, noting $86 million of a $100 million start-up lending commitment is out the door and more than 25,000 businesses now use the Westpac One Business platform.
For business owners, that is leverage. A bank losing ground on mortgages and leaning into commercial lending is a bank that wants your account. If you haven’t benchmarked your facility pricing this year, now is the time.
A margin squeeze is not reform
The temptation will be to cheer this as proof that political pressure worked. It didn’t, and it won’t fix the structural issue. Parliament’s 13-month banking inquiry, reported in August 2025, found regulation imposes disproportionate costs that make it harder for smaller banks and non-bank lenders to compete.
In 2025, Massey University banking professor David Tripe warned that if the big banks “got really vicious on margins, you’d drive Kiwibank and the Cooperative Bank and the like out of business”. The real advantage, he argued, was “not capital. That is costs. The costs of regulation are a big factor in that.”
That is the uncomfortable truth. A big-four price war, absorbed by a bank still clearing more than $1 billion, can squeeze the challengers harder than the incumbents.
What happens next
With rates settling and McGrath signalling optimism, margins may stabilise from here. Competition that lasts will depend less on Westpac’s next result and more on whether the government follows through on cutting the compliance cost gap. A thinner margin at one big bank is welcome. A market where smaller lenders can force that outcome every year would be better.
Sources
- 1News: Full-year profit slips at Westpac in face of stiff competition (2026-11-01)
- NZX: Westpac NZ 2026 Full Year Financial Results Media Release (2026-11-02)
- Westpac: Westpac New Zealand Limited Disclosure Statement – 30 September 2026 (2026-11-01)
- Interest.co.nz: Westpac NZ annual profit falls with income down, expenses and loan impairments up (2026-11-02)
- NZ Herald: Westpac’s profit jumps 13%, as it fattens its margins (2025-11-02)
- BusinessDesk: Westpac NZ builds workforce as bad debts weigh on profit (2023-11-05)
- Westpac: Westpac NZ grows in key segments in competitive market (2026-11-02)
- RNZ: Full-year profit slips at Westpac in face of stiff competition (2026-11-02)
- RNZ: Banking inquiry acknowledges it’s no silver bullet for competition (2025-08-22)
- Newsroom: Telling banks to ‘drop ’em’ is easy politics (2025-02-20)
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