Sydney, Jan 31, 2026, 17:24 AEDT — Market closed
- Westpac shares ended Friday up 0.8%, outperforming the softer broader market
- Bank valuations hinge on rate expectations ahead of Tuesday’s RBA decision
- Westpac is set to release its first-quarter update on Feb. 13
Shares of Westpac Banking Corp closed Friday up at A$38.82, after trading in a range from A$38.51 to A$39.20 earlier in the session. (Yahoo Finance)
As the local market rests over the weekend, investors are bracing for a week that might reset the mood for Australia’s banks. The Reserve Bank of Australia’s meeting is set for Feb. 2–3, with its policy decision scheduled on Tuesday. (Reserve Bank of Australia)
For Westpac and its larger competitors, the issue isn’t simply whether to raise rates or pause. The real focus is on the tone of their message—and what it signals for lending rates, funding costs, and borrowing demand.
Banks hinge their fortunes on net interest margin—the gap between loan earnings and funding costs. A sudden central bank move can quickly alter that spread, reshaping the intensity of competition among mortgage lenders.
Westpac climbed on Friday, even as the S&P/ASX 200 slipped 0.65%, pulled lower by weakness in materials and mining-related shares. (Investing)
The rate call has tightened following a series of inflation reports and market moves that have left traders on edge, especially when it comes to the “big four” banks. Andrew Boak, chief economist at Goldman Sachs, described February’s decision as “a very close call” in a recent note. (Reuters)
A rate hike might boost bank earnings on paper, but it comes with risks. If borrowers slow down or arrears climb, any gains from higher loan rates can vanish quickly.
On the funding side, wholesale costs often jump before deposit rates adjust. Australia’s banks remain fiercely competitive for term deposits as customers react to rate changes.
Westpac’s calendar is busy beyond the RBA, with first-quarter results set for Feb. 13. This report serves as a key update on mortgage trends, business lending, and credit quality. (Westpac)
Tuesday’s RBA decision is the next obvious catalyst, followed ten days later by Westpac’s quarterly update. That report will be investors’ first real opportunity this year to see if the bank’s pricing, margins, and bad-debt assumptions line up with market expectations.
