Westpac isn’t one we own, however the result (a sizeable miss relative to consensus) is still interesting.

Expenses up 9% 2H/1H, and NIM down 9bps in total. That’s quite a bit. The NIM decline will place them just above ANZ in the below graph, for this half (to 1.87%, excluding treasury and markets)…

…and the outlook statement guides them even lower over the next (to 1.80%).

The additional cost comes from a few thousand additional employees, and expenditure across financial crimes, governance and regulatory systems.

Westpac has had a higher efficiency ratio (meaning more cost, less efficient) than peers for some time.

The buyback is large, and supportive to the share price, but well understood as a driver, as is the provision write back story.

Overall, not a tremendous update, a pretty material miss to consensus expectations ($5.35bn actual, vs $5.42bn consensus) and the market reaction strikes us as fair.

For many years we’ve been generally sceptical of claims about just how competitive things are, in the mortgage market, but the rise of digital banks, non-bank-financial institutions, and BNPL players does seem like a more legitimate step up in competitive intensity, which is unlikely to abate any time soon, and places a further overhang on the sector.

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