Sydney, Feb 25, 2026, 16:59 AEDT — The market is done for the day.
- Westpac finished the day A$0.40 higher at A$43.05, up 0.94%.
- Core inflation in Australia edged up, prompting traders to price in an additional rate increase by May.
- Brokers are dialing back their optimism on big bank valuations, despite the strong streak in earnings.
Westpac Banking Corp finished Wednesday up 0.94%, settling at A$43.05. Investors parsed a stronger core inflation number, raising fresh questions about the Reserve Bank of Australia’s next steps.
Australia’s latest monthly CPI figures put the trimmed mean—favored by the RBA—at 3.4%, the highest in 16 months. Headline inflation stuck at 3.8%. The odds for a May rate hike spiked to roughly 80%, according to Reuters.
Banks care because shifting rate bets hit net interest margin—the difference between what they make on loans and shell out on deposits—right as funding costs and rivalry keep changing. A steeper rate path? That can put pressure on lofty valuations throughout the sector, too.
“Annual CPI inflation held steady at 3.8 per cent for January, matching December’s rate,” ABS head of prices statistics Michelle Marquardt said in the statement with the release. Australian Bureau of Statistics
ASX 200 logged a fresh record, climbing 1.1% to finish at 9,128.3 points, as a flurry of earnings updates buoyed the market.
Even so, a few strategists are turning cautious on price. Both Macquarie and Morgan Stanley have signaled that Australia’s major banks might not see further easy upside; Morgan Stanley, in particular, has slapped an underweight on Westpac, citing valuation and highlighting the execution risk around its UNITE tech overhaul.
The tone was set by Westpac’s recent results. Reporting unaudited first-quarter net profit of A$1.9 billion earlier this month, the bank also noted its core net interest margin edged down to 1.79%, squeezed by persistent competition. CEO Anthony Miller described credit demand as “resilient.” Reuters
The risk is right there: should inflation prove stubborn and force the RBA into another hike, banks could feel the squeeze from slower credit growth and pricier deposits—even as they pour money into tech and battle over home loans.
All eyes now turn to the RBA’s March 16–17 meeting, with a policy call expected on March 17. For Westpac, investors are already moving ahead, watching for the bank’s interim results and dividend news set for May 5.
