Westpac expects to cut more jobs in the year ahead as it aims to simplify its business in the face of slowing economic growth and weak demand for loans.
Australia's second largest home lender says 2013 will be a challenging year, as consumer sentiment remains weak and the high Australian dollar causes stress for small businesses and many parts of the economy.
"We do expect 2013 to remain a challenging year," chief executive Gail Kelly said on Monday.
"The Australian dollar is likely to remain high."
The forecast came as the bank reported its net profit in the year to September 30 dropped 15 per cent from the previous year to $5.97 billion.
The fall was a result of a significant tax benefit in the previous year related to Westpac's integration of St George, a benefit that was not repeated in fiscal 2012.
Cash earnings, a clearer measure of the bank's ongoing operations, rose five per cent in the 12 months to September 30 to $6.6 billion, beating analyst expectations of $6.46 billion.
Westpac's retail and business banking operations delivered the strongest growth in cash earnings, as loans increased by four per cent and deposits were up seven per cent.
But demand for loans is expected to remain weak, particularly in housing, where Westpac is happy to grow lending by less than the industry average of about four per cent, Mrs Kelly said.
Improving efficiency is a focus for the bank, which cut staff by 1,760 in the year to September as part of a productivity program.
Mrs Kelly said most of those were contract roles.
"I expect overall the numbers of staff to reduce next year, but probably not at quite the rate we had over the last few years," she said.
Analysts welcomed Westpac's results, particularly the cash earnings performance and a four cent increase to the final dividend which took it the payment to 84 cents a share.
Investors agreed, with Westpac shares adding 38 cents, or 1.5 per cent, to $25.41 by 1507 AEDT.
But analysts noted a rise in Westpac's bad debt costs in the year to September.
"There are some early signs of increasing stress, particularly in small-medium enterprises and sectors impacted by the high dollar and consumer caution, but nothing too alarming," Morningstar analyst David Ellis said.
Chief financial officer Phil Coffey said the rise was caused by more bad debts being written off, not a wave of newly impaired loans, and overall impaired assets had continued to shrink.
"If you look at our gross impaired assets it's still ticking down, but not at a steep decline," he said.
The Australian dollar remains a key concern for many businesses, but other economic fundamentals such as employment remain strong, he said.
Meanwhile, Mrs Kelly said she plans to stay in her current job for some time.
"I'm really enjoying what I'm doing, and so I have no plans other than carry on," she said.