Westpac's annual result shows the bank’s credit quality remains sound, but pockets of mortgage stress can be expected as interest rates stay higher for longer, Jarden analysts say. 

Westpac reported an 18% decline in net profit to $963 million on Monday, and despite believing mortgage pressure will rise – particularly in commercial real estate and construction,  Jarden analysts have lifted Westpac’s financial rating from underweight to neutral. 

The analysts say the bank’s planned $1.5 billion share buyback plan, announced on Monday, indicates strong potential for further capital management. 

Westpac also plans to invest $2b a year for four years to simplify the business, reducing the number of systems by two-thirds and reducing costs. 

Jarden’s analysts are unsure if that will be enough on its own to drive the turnaround, but said it would serve as a trigger toward a more positive outlook after long-term underinvestment from the bank.