The Westpac Banking Corporation 's (Westpac) Aa2 senior unsecured rating incorporates two notches of uplift from our Advanced Loss Given Failure (LGF) analysis and one notch uplift for government support over the bank's Baseline Credit Assessment (BCA) of a2.

Westpac’s a2 BCA is underpinned by its conservative balance sheet settings and in particular, its strong capital position and healthy asset quality. That said, we expect the recent rise delinquencies to continue as households face pressure from high interest rates and inflation. However, we expect any increase in loan losses to be manageable in the context of the bank's healthy loan loss reserves and capital base. Profitability will face pressure over the next 12 months from competitive pressures in mortgage pricing, rising funding costs and credit costs.

The bank's funding and liquidity remains sound and it retains good access to funding markets. However, the bank is exposed potential volatility in funding conditions at a time when Moody's expects wholesale funding requirements to rise as deposit growth slows and pandemic-related central bank funding matures.