AAP Finance

War hits home for big Aussie bank as confidence slumps

Apr 14, 2026

Westpac shock — Westpac says market volatility has dented some of its income, ahead of its interim results. -AAP Image

Australia's second-largest bank has warned that the Middle East conflict is creating challenges for customers, as confidence crashes to its worst level since the pandemic.

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Westpac, which will release its first-half results seven days before federal Treasurer Jim Chalmers hands down his next budget, on Tuesday released its latest survey of how Australians are feeling.

The Westpac–Melbourne Institute consumer sentiment index fell 12.5 per cent to 80.1 points in April, as spiking fuel prices and rising interest rates weighed.

It was the worst monthly fall in the survey since the onset of the COVID-19 pandemic, leaving it close to historical lows.

At the same time the bank, which releases its results on May 5, reported that the conflict has dented earnings contributions from one of its internal businesses.

The lower income from the treasury and markets division, driven by volatility, means its net interest margin contribution will fall to seven basis points in the second quarter of fiscal 2026, from 15bp in the first quarter.

The conflict in the Middle East, which is now entering its seventh week, began on February 28 when the US led an attack on Iran.

Since then, financial markets have been volatile as the price of crude oil has jumped from around $US70 a barrel before the war to peaks well above $US100, leading to higher domestic petrol prices and concerns about fuel supply.

"With the supply shock from the energy market disruption expected to result in higher inflation and higher interest rates, an expected slowing in economic growth will create a more challenging environment for some customers," Westpac told the Australian stock exchange.

ANZ bank economists on Tuesday raised their price expectations for a barrel of oil to more than $US90 for the rest of the year, up from $US80 previously.

While Westpac said it was well-positioned to support customers amid the ongoing uncertainty, it also flagged its net profit would be reduced by $75 million.

This was due to a "notable item" in the RAMS mortgage business, which it is selling to Pepper Money, KKR and PIMCO. The sale will be completed in the second half of its fiscal year.

The bank is currently expected to post a first-half net profit of around $3.6 billion, which would be a small improvement on the previous corresponding half, according to analysts.

Westpac shares fell by around two per cent in morning trading to $41.64.