Principal at fund manager Alphinity, Andrew Martin, said that with unemployment at historically low levels and many customers ahead on their repayments, the banks were trying to tell investors that things were highly unlikely to get better from here. However, that did not mean they were facing a major problem with borrowers stress.

“It feels like if you’re ever going to go into a downturn, now’s not a bad time to do it, but even then, things have to deteriorate because they are just so good,” Martin said.

Another key point of interest for investors is Westpac’s net interest margin (NIM) - which compares funding costs with what the bank charges for loans. Westpac’s NIM expanded by 5 basis points in the half, compared with a 10 basis point expansion from rival ANZ Bank at its recent results.

Macquarie analyst Victor German said he thought the main reason for the share price slump was the fact its net interest margin had increased less sharply than rivals ANZ and Bank of Queensland.

“I think the market was expecting stronger margin exit rates which would more than offset higher expense growth, and to the extent this dynamics is not as significant as initially expected, there is some disappointment,” German said.

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Westpac also revealed it was changing a previous commitment to get its cost base to $8 billion by 2024, because of higher-than-expected inflation. It is now targeting a cost base of $8.6 billion, though some analysts questioned if that would be a challenge for the bank.

Westpac’s profits for the year were weighed down by previously announced charges, and the bank declared a fully franked final dividend of 64¢ a share, to be paid on December 20. Westpac’s annual report also showed King’s total remuneration rose from $3.4 million to $3.9 million in 2022.

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