Australia's second-biggest bank says while interest rates and inflation are rising, the proportion of its customers behind on their mortgage payments is actually dropping.
As Westpac on Monday reported a full-year profit of $5.7 billion, chief executive Peter King said many customers built up savings during the pandemic and two-thirds were ahead on their repayments.
But he said it is "inevitable" the impact of higher rates would be felt, including when borrowers' low fixed-rates roll over onto higher variable rates.
"That will be hard for people, and it's important to acknowledge the challenges ahead as customers navigate the tougher environment," he said.
As of September, just 1.07 per cent of Westpac's assets were considered "stressed", down from 1.1 per cent in March and 1.91 per cent in September 2020.
Just 0.51 per cent of borrowers were more than 90 days behind on their payments, down from 0.56 per cent in March and 0.8 per cent in September 2020.
Mr King said the Australian economy remained robust, but the heat would come out of it as rates rise.
"Housing prices have fallen in recent months and this will continue into 2023. Credit growth is expected to ease. GDP growth will slow and unemployment will rise," he said.
"These will be necessary outcomes if we are to lower inflation."
The bank on Monday posted a better-than-expected earnings result, with $5.7b in net profit for the 12 months to September 30, up four per cent from the year before.
Revenue was down two per cent to $19.9b and cash earnings fell one per cent to $5.3b, beating consensus estimates by 3.7 per cent, according to E&P Financials banking analyst Azib Khan.
At 1.23pm AEDT Westpac shares were down 4.2 per cent to $23.12, the worst performance of any of the big four banks, even ex-dividend ANZ.
Mr King said Westpac's mortgage business grew slower than its peers over the year, but gained momentum in the second half.
He was pleased with the roll-out of the Westpac app, which offers improved self-serve capabilities and a less than two second log-on speed.
Westpac said it was continuing its migration to digital, with the number of Australian branches down 14 per cent over the past two years, to 732, while the number of Westpac ATMs is down 16 per cent to 1,071 over the same period.
Meanwhile, Westpac's number of digitally active customers is up five per cent to 5.48 million, and its digital transactions are up 13 per cent to 356 million.
Westpac will pay a final dividend of 64 cents per share, taking the full year payout to $1.25.
WESTPAC'S 'SOLID' 2021/22
* Revenue of $19.9 billion for the 12 months ended September 30, excluding notable items, down two per cent from a year ago.
* Net profit of $5.7b, up four per cent from a year ago.
* Cash earnings of $5.3b, down one per cent
* Final dividend of 64 cents per share, fully franked, from 60 cents a year ago.