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By Stuart Condie

  SYDNEY--Westpac raised its final dividend despite a 1.0% drop in annual profit on higher operating costs and fierce competition for deposits and loans. 

  Australia's third-largest bank by market capitalization on Monday reported a net profit for the 12 months through September of 6.92 billion Australian dollars, equivalent to about US$4.53 billion. It raised its final dividend to A$0.77 from A$0.76. 

  Revenue rose by 3.7% to A$22.38 billion, but a contraction in net interest margin and a 9.0% rise in operating expenses hit the bottom line. Costs included those supporting a multiyear technology overhaul, and A$273 million related to what the bank called productivity initiatives. 

  Net interest margin--a key indicator of lending profitability--fell to 1.94% from 1.95% a year ago. However, it improved over the course of the fiscal year, to 1.95% in the second half from 1.92% in the first. 

  The average analyst forecast had been for net profit to fall to A$6.86 billion, according to data compiled by Visible Alpha. Consensus was for revenue of A$22.26 billion and a net interest margin of 1.93%. 

  Mortgage lending grew by 5.0% on-year, slower than the sector as a whole. Westpac said it had agreed to sell the A$21.4 billion home-loan portfolio from its Rams subsidiary to a consortium including U.S. private-equity giant KKR & Co. 

  However, business lending grew by 15% on-year as Westpac refocused under Chief Executive Anthony Miller, who formerly led Westpac's business and wealth division before taking the helm in December 2024. 

  Analysts have flagged a broad shift by lenders toward business banking, which is seen as more profitable and less saturated than consumer banking. Westpac's business deposits rose 5.5%. 

  Write to Stuart Condie at stuart.condie@wsj.com 

  (END) Dow Jones Newswires

  November 02, 2025 17:13 ET (22:13 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.

Rolls-Royce has signed a memorandum of understanding (MOU) with the State of Victoria, Australia that outlines a commitment to collaborate on developing Victoria’s defence industry skills, supply chain, and innovation eco-system, to support the AUKUS submarine program.

Developing nuclear skills will be a particular focus, with plans to establish Rolls-Royce-affiliated skills and training academies being explored. This would build on the success of the award-winning Rolls-Royce Nuclear Skills Academy which opened in Derby, UK, in 2022. It has seen up to 200 apprentices enrolled on apprenticeships each year, creating a pipeline of nuclear talent at the start of their careers to support the UK Royal Navy. 

The agreement will also look to support launching specific research and development initiatives, including the establishment of Rolls-Royce University Technology Centres and affiliated research clusters, in collaboration with Victorian universities.

Following similar agreements signed with Western and South Australian Governments in September 2025, this marks a significant step forward in Australia’s preparations for operating its first conventionally armed nuclear-powered submarines. It also highlights the unique nuclear expertise Rolls-Royce brings to the AUKUS agreement.

Victoria is at the forefront of research and innovation in Australia. The State hosts eight world-leading universities with advanced research and development capabilities. In December 2024, Victoria released its Economic Growth Statement, which backs its defence-oriented supply chain to win work, grow and support AUKUS. This includes increases in investment and trade facilitation, uplifts in small and medium-sized enterprises, workforce development initiatives, and bolstering innovation adoption.

To this aim, the collaboration agreement will also look to facilitate opportunities with Victorian small and medium enterprises, to strengthen the State’s defence supply chain and broader industrial capabilities.

Rolls-Royce has powered the UK Royal Navy’s nuclear submarines for over 65 years and is expanding its Derby site to support both UK and Australian defence programs. Rolls-Royce is the only private company in the world with the nuclear capability to manage reactor design, manufacture and decommissioning within one single entity. 

In March 2023, it was confirmed that Rolls-Royce Submarines would provide all the nuclear reactor plants that will power new attack submarines as part of the tri-lateral agreement between Australia, the UK and US. 

That’s because higher asset prices are spurring consumers to spend more freely than before, and consumption represents about 70% of GDP. In fact, this so-called wealth effect has become more potent in just the last 15 years.

Today, every 1% increase in stock wealth translates to a 0.05% uptick in consumer spending, according to a note last week from Oxford Economics lead U.S. economist Bernard Yaros.

In other words, a $1 increase in stock wealth leads to a $0.05 marginal propensity to consume, up from less than $0.02 in 2010. Meanwhile, every $1 increase in housing wealth leads to a $0.04 bump in consumption, up from $0.03.

“As households see their wealth rise, they turn more sanguine about their personal financial situation and are more inclined to loosen their purse strings,” Yaros wrote. “Increases in wealth will also propel spending by allowing homeowners to extract more equity from their houses or to liquidate appreciated stocks to fund their current consumption.”

He sees the wealth effect sending the marginal propensity to consume even higher in the coming years because retirees will comprise a bigger share of the population.

Given that they already enjoy a bigger net worth than younger generations do, retirees will rely more on their wealth to support consumption after they stop working and earning an income, Yaros explained.

On top of that, the ubiquity of digital media means consumer sentiment reacts even quicker to market news, reinforcing these wealth effects, he added.

This more powerful wealth effect could help explain why consumer spending has stayed resilient. Even as President Donald Trump’s trade war has kept inflation sticky and made businesses more nervous about adding workers in an uncertain landscape, AI is still propelling the stock market to new record high after record high.

At the same time, the stock market has grown more dependent on AI-related stocks, such as chip leader Nvidia along with so-called hyperscalers like Microsoft and Google.

Based on his wealth-to-spending math, Yaros estimated that stock market gains in the last 12 months from the tech sector alone will boost annual consumption by nearly $250 billion, which would account for more than 20% of the cumulative spending increase.

“While the stock market is not the economy, the latter risks greater whiplash from the ups and downs in the
former,” he wrote.

Analysts at JPMorgan also looked at the the link between the AI boom and consumers in a note last month. They estimated U.S. households gained more than $5 trillion wealth in the last year from 30 AI-linked stocks, raising their annualized level of spending by about $180 billion.

That represents just 0.9% of total consumption, but JPMorgan noted that it could go higher if AI spurs gains in a broader array of stocks or in other assets like real estate.

And stocks are not limited to wealthier Americans either. A survey released last month from the BlackRock Foundation and Commonwealth showed that over 54% of Americans earning $30,000-$79,999 a year are retail investors in the capital markets. And more than half of that cohort began investing in the past five years.

To be sure, the wealthiest still spend the most dollars, and the emerging K-shaped economy has magnified their impact. Research from Moody’s found that the top 10% of earners accounted for half of spending in the second quarter, a record high.

Michael Brown, senior research strategist at Pepperstone, attributed that to the wealth effect from stock and real estate gains as well as from income disparities.

“Tying all this together produces two things — an economy increasingly reliant on discretionary spending among higher earners, and higher earners whose discretionary spending is reliant on risk assets remaining buoyant,” he said in a note on Tuesday.

This dynamic means central bankers at the Fed who control monetary policy and lawmakers in Congress who control fiscal policy have a greater incentive to support the stock market, Brown added.

That’s because the wealth effect can work in the reverse direction, meaning falling assets prices will slow spending and the economy.

“What we have, then, is an economy that’s tied increasingly closely to the fortunes of the equity market, and an equity market that’s increasingly tied to overall consumer spending, which coupled together result in stronger ‘put’ structure to backstop risk assets, with fiscal stimulus continuing, and monetary backdrops becoming looser,” he said.