Westpac shares have dropped more than four per cent after the bank posted a disappointing $3.78 billion first half cash profit.
The result for the six months to March 31, is flat compared to a year ago and below the $3.88 billion cash profit the market had expected.
IG market strategist Evan Lucas said the result was weaker than even the most pessimistic analyst forecast.
"It's one of the poorest Westpac results I've seen in four or five years," he said.
"There's a lot of questions there, and not good ones."
Westpac shares were down $1.54 to $35.19 as of 1010 AEST.
Net profit, which includes one-off items, was $3.609 billion, compared to $3.622 billion for the same period a year ago.
Meanwhile, Westpac lifted its fully-franked interim dividend three cents to 93 cents per share.
The result was weighed down by a 17 per cent slide in earnings from Westpac's institutional bank, but the bank also suffered due to tough competition for home loans.
Westpac's net interest margin, a measure of the profit it makes on loans, fell six basis points to 2.05 per cent.
But net interest income was up four per cent to $6.93 billion following a seven per cent increase in Australian housing lending.
Chief executive Brian Hartzer expects competition for loans to remain intense but believes growth in the housing market will help offset weakness from other parts of the economy, including mining.
"Areas like housing, infrastructure, and agriculture will do relatively well, while other areas such as mining and resource-driven regions and adjacent service providers will find it tough," he said.
"For Australian banks, this means that credit growth will be modest but positive with housing growing faster than business."
Westpac has also announced it will use the proceeds of its dividend reinvestment program to lift its capital reserve ratios, the amount of money it holds against loans.
The bank's common equity tier 1 ratio was 8.8 per cent during the half, which is at the bottom end of Westpac's target range and it hopes to raise $2 billion in fresh capital through the reinvestment plan, which will include a 1.5 per cent discount for shareholders.
WESTPAC'S FLAT HALF
* Cash profit of $3.78b, versus $3.77b in 2013/14
* Net profit of $3.609b, versus $3.622b
* Interim dividend of 93 cents, up three cents
Share
