Recently Issued: Westpac has launched new USD bond offering yields of 4.9%

• New Bond Issuance: Westpac Banking Corp (WBC) has issued two USD-denominated bonds, comprising a 3-year senior unsecured bond offering a yield to maturity of 4.9% providing investors with exposure to a high-quality Australian bank across different tenors and seniority levels.
• Bond Recommendation: We remain positive on WBC and recommend investors consider the bonds highlighted below, supported by its strong credit profile, resilient asset quality, prudent provisioning, and robust capital and liquidity buffers. Although slower housing credit growth and continued lending competition may weigh on earnings momentum, WBC's solid balance sheet and funding profile provide a strong buffer, reinforcing its position as a high-quality and defensive credit. (Table 1)

Table 1: WBC New Issuance Bond

• Company Overview: WBC is Australia’s second-largest banking group, with a market capitalisation of approximately AUD36 billion as of 11 November 2026. It operates across five core divisions, serving customers from individuals to large corporations. Despite its international presence, earnings are primarily driven by its Australian retail banking business, particularly residential mortgages, which underpin its profitability and strong domestic franchise.

• Stable Earnings Performance: WBC delivered a stable 3Q26 performance (as of June 2026), supported by continued loan expansion. Gross loans and acceptances rose by 7.3% YoY, while average interest-earning assets grew by 5.5% YoY, reflecting sustained lending momentum. However, net interest margin (NIM) declined by 10bps to 1.89%, primarily driven by tighter spreads amid intense lending competition. This decline was offset by asset growth, keeping net interest income flat at AUD 5.0 billion, while non-interest income remained stable at AUD 0.7 billion.

• Resilient Asset Quality: Non-performing loan (NPL) ratio improving to 1.10% from 1.21% in 3Q25. This was supported by a decline in 90+ day delinquencies to 0.58% from 0.75% over the same period, indicating improved borrower repayment capacity. Meanwhile, 86% of mortgage accounts were ahead on repayments, highlighting continued resilience in the mortgage portfolio.

• Prudent Provisioning: WBC increased to AUD 5.30 billion (3Q25: AUD 5.07 billion), this reflects a prudent approach to maintaining strong balance sheet buffers amid global uncertainty. WBC also retains an approximately AUD 2.0 billion buffer above expected losses under its base case scenario. This conservative posture is reflected in a provision coverage ratio (collectively assessed provisions to credit risk-weighted assets) increase from 1.25% in 3Q25 to 1.27% in 3Q26 to provide a significant cushion against potential future volatility.

• Robust Capital Position: WBC reported a (CET1) ratio has slightly to 12.1%, well above the minimum regulatory requirement of 10.25% and the bank’s post-dividend operating target of above 11.25%. The strong capital position was primarily supported by earnings generation (+38bps), although this was partially offset by dividend distributions (-57bps) and growth in Risk-Weighted Assets (RWA) (-31bps), reflecting ongoing loan expansion and balance sheet growth.

• Strong Liquidity Position: WBC reported a Net Stable Funding Ratio (NSFR) at 111% and the Liquidity Coverage Ratio (LCR) at 134%, both well above regulatory minimum regulatory requirement of 100%. In addition, the bank maintained a substantial LCR surplus of approximately AUD $46 billion, providing a strong liquidity buffer against potential market stress and funding volatility.

• Mortgage Applications Weaken After Federal Budget: average monthly mortgage application volumes have declined by approximately 20% since the recent Federal Budget tax changes and by 11% from the previous quarter, suggesting potential headwinds for mortgage growth in the coming quarters.

• Housing Loan Growth Expected to Moderate: WBC expects housing credit growth to moderate from 6.8% in FY26 to 4.7% in FY27, before recovering modestly to 5.2% in FY28. Investor lending growth is expected to slow more significantly, from 9.1% in FY26 to 4.5% in FY27 and 4.4% in FY28, while owner-occupier lending growth is forecast to moderate from 5.7% to 4.8% before recovering to 5.6% in FY28. We echo the same view highlighted in our previous article, as the 2026–27 Federal Budget is expected to curb speculation in established properties while maintaining tax incentives for new residential development.

• Growth Moderation Rather Than Credit Deterioration: Despite weaker mortgage activity following the Federal Budget and in the latest quarter, expects the slowdown to reflect a moderation in lending momentum rather than a deterioration in credit quality. Asset quality remains resilient, supported by prudent provisioning and strong borrower repayment capacity.

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