The result comes at a challenging time for the banking sector due to low interest rates, increased political and regulatory scrutiny and uncertainty in the international economy.
Analysts are describing today's result as solid, with no obvious concerns or surprises, and the bank's shares are trading up $3.20 per cent at $30.66 at midday.
"We are continuing to deliver our service-led strategy, increasing customer numbers, delivering world-leading digital services, and supporting more customer needs," says Westpac CEO Brian Hartzer.
"At the same time, we have strengthened our balance sheet, carefully managed margins, and achieved $263 million in productivity savings, while increasing our investment in digital and other service initiatives."
The bank sees its previous 15 per cent ROE target as unrealistic, due to continued low interest rates and 'evolving regulations for capital and liquidity', alongside higher regulatory and compliance costs.
It was Westpac's institutional bank that provided a drag on the company, with earnings down 18 per cent at $1.098 billion. It was hampered by a $215 million increase in impairment charges (up 49 per cent on the previously year), largely due to provisions made for 'four large names' in the first half of the year, which accounted for a $177 million of the charge.
Hartzer, says the consumer bank continues to be the driver of the group's growth the division had cash earnings of $2.98 billion, up 12 per cent on the previous year.
"It expanded its customer base by 3 per cent and had strong home loan and deposit growth of 8 per cent and 7 per cent respectively," he says.
The business bank also delivered solid growth in core earnings, with a 5 per cent rise in lending and a 9 per cent increase in deposits. Its earnings rose 1 per cent to $1.999 billion.
"The business bank delivered solid growth in core earnings, with a 5 per cent rise in lending and a 9 per cent increase in deposits," says Hartzer.
This year, the Federal Government forced banks to hold a greater share of Tier 1 capital, to put them in a stronger position to stave off financial shocks.
Westpac undertook a $3.5 billion capital raising in November to finance its response to the new banking regulations, which resulted in earnings per share dropping 5 per cent on the previous year to 235.5c, while cash earnings of $7.822 billion were in line with the previous year.
"The improvements we've made further reinforce that Westpac's balance sheet remains unquestionably strong. However, the additional shares issued at the start of the year have lowered the Group's earnings per share and reduced our return on equity," says Hartzer.
Westpac's final fully franked dividend is 94c per share, bringing the full-year dividend to $1.88 per share.
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