Mr Hartzer said the bank's performance was being hit by weak economic conditions and the bank could face further lawsuits or fines from regulators. The bank also forecast a further $245 million rise in its risk and compliance spending. “I think we’re in a cyclical downturn for the economy where growth rates are low, credit demand is low and interest rates are very low at the same time as there’s a significant investment required in regulatory and compliance matters,” Mr Hartzer said in an interview with The Sydney Morning Herald and The Age. While Mr Hartzer would not give profit guidance, analysts said it would be tough for the bank to post any profit growth in 2020. Shaw and Partners analyst Brett Le Mesurier said: “Excluding remediation costs, profits should be down, because there should be no revenue growth or revenue growth close to zero.” PM Capital portfolio manager Uday Cheruvu said the results showed banks' capacity to make profits had been "significantly" hurt by the crackdown on wealth management - which has sparked fee cuts and divestments - and lower interest rates were also dragging on returns.

“I cannot see a way that they can grow profits in the near future,” Mr Cheruvu said of Westpac. In a double-whammy for shareholders, Westpac said it would raise $2.5 billion in equity capital from its investors, while also slashing its dividend to 80c from 94c, the first cut in the payment since 2009. The dividend will be fully franked and paid December 20. Trading in the Westpac shares was halted on Monday morning, but the results helped to spark a 2.5 per cent fall in National Australia Bank shares to $27.69, ahead of its results on Thursday. ANZ Bank shares fell 0.9 per cent to $25.95 and Commonwealth Bank shares dropped 1.5 per cent to $77.05. The bank’s common equity tier 1 capital ratio, a key gauge of strength, was 10.7 per cent of risk-weighted assets, ahead of the 10.5 per cent required by regulators. Mr Hartzer said the bank was raising the extra capital to give the bank a bigger buffer above the regulator’s minimum level, and it would create "flexibility" for changes in capital rules of potential litigation against the bank.

It reiterated the possibility of financial crimes regulator Austrac taking action against the bank over past breaches of anti-money laundering laws, but did not estimate the potential fine it could face as a result. Loading Westpac’s net interest margin (NIM), which compares the cost of funds with what it charges for loans, fell to 2.12 per cent over the year, from 2.13 per cent. The bank said margins were lower at the end of September than over the entire half, which analysts said suggested lower margins in the coming six months. With all banks facing a squeeze on their profitability, Westpac pointed to its moves to cut costs. Full-time staff numbers fell by 1,741, as part of $405 million in "productivity" savings, and the bank plans to cut another $500 million in costs over the year ahead. Amid increased competition from fintech businesses, Mr Hartzer said the bank was investing in a digital-only banking platform, which would sit alongside the bank’s other offerings.