Westpac has lifted first-half profit 5.8 per cent to $4.25 billion, helped by a mortgage book it says is "fundamentally sound".
Cash profit for the six months to March 31 was up from $4.02 billion in the prior corresponding period, with consumer and business banking driving the increase.
Australian mortgage lending was up 5.6 per cent on the same time a year earlier and net interest margin (NIM) - a key measure of profitability - rose 0.07 percentage points over the half and by 0.10 percentage points over the year.
Higher rates for interest-only and investor mortgages were the biggest driver of the improved NIM, and chief executive Brian Hartzer said the bank was well placed to capitalise on a slowdown in east coast housing markets.
"While the housing market is expected to continue to cool, this dynamic means that opportunities are opening up for first home buyers, who are beginning to step up in place of investors," Mr Hartzer said.
"With solid underlying demand relative to supply, and almost 70 per cent of our customers ahead on their repayments, the Australian housing market is in good shape."
Two weeks ago, UBS analysts cited incomplete income and expense checks on home loan customers when they downgraded Westpac a "sell".
But Westpac on Monday called its credit portfolio "fundamentally sound".
Australian mortgage repayments 90 or more days overdue represented just 0.69 per cent of the book - 0.02 percentage points higher than both six months and a year ago.
The bank holds a total 398 repossessed houses nationwide.
The federal government's bank levy trimmed 0.05 percentage points off the NIM, while the banking royal commission added $34 million in extra costs.
WESTPAC'S FIRST HALF
* Cash profit up 5.8pct to $4.251b
* Net profit up 7.4pct to $4.198b
* Operating income up 3.6pct to $11.151b
* Interim dividend flat at 94 cents, fully franked
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