Australian banking heavyweight Westpac posted a 3 % rise in interim net profit on Monday as it battles regulatory changes and rising bad loans, disappointing investors who savaged the share price.
Westpac's Aus$3.70 bn (US$2.81 bn) result in the six months to March 31 kicked off a week of half-yearly reporting from the nation's top lenders, which all face similar concerns.
Slumping commodity prices are squeezing Australia's resources companies, causing worries for banks that have lent them billions of dollars.
The banks are also juggling new rules by the Australian Prudential Regulation Authority that demand they hold more reserves as a buffer against mortgages -- part of a global effort after the 2008-9 financial crisis.
Westpac's cash profit, the industry's preferred measure which strips out volatile items, was Aus$3.90 billion.
This was below expectations and its stock was sold off, slumping 3.54 percent to close at Aus$29.50.
"The increase in bad debt provisions is a bit larger than generally expected," said CMC Markets chief analyst Ric Spooner, explaining the market reaction.
Impairment expenses of Aus$667 million, to firms it did not identify, were recorded for the first half, almost double last year's level.
"This was mainly about four large corporate debtors and problems in this area had previously been flagged to the market," added Spooner.
Chief executive Brian Hartzer said the result was sound given the environment.
"Westpac remains well-placed to respond to this challenging environment," he said.
"We have strengthened our balance sheet and made good progress implementing our strategy to build one of the world's great service companies by investing in growth, service and productivity initiatives."
In response to the regulatory changes, the bank raised around Aus$6.0 billion in equity over calendar 2015 which Hartzer said had "materially strengthened the group's capital base" but which impacted earnings per share.
"Importantly, on most measures, overall asset quality remains sound, with the level of stressed assets little changed over the half," he added.
"There have been a few pockets of stress, mostly related to lower commodity prices, and an increase in provisions for a small number of larger exposures, which contributed to a rise in impairment charges."
Despite rising bank funding costs and tougher capital rules, Westpac managed to raise its dividend by one cent to 94 cents per share from the same period last year.
ANZ Bank reports its interim profit on Tuesday while National Australia Bank follows on Thursday.
The Commonwealth Bank, the country's biggest lender, follows a different cycle. In February it posted a modest two percent rise in first-half net profit to Aus$4.62 bn.