“The past six months has been a turning point for the bank. We are proactively addressing legacy issues while improving our products and services to ensure they deliver the right customer outcomes. We’re exiting personal financial advice to focus on the parts of our wealth business where we have a competitive advantage, and we are delivering significant cost savings by simplifying our business."

Net interest income was down 4 per cent in the half, while income from fees plunged 32 per cent. Like its rivals, the bank is also looking to cut costs in response to the weaker business conditions, and Westpac said that excluding remediation and restructuring, its expenses were down 3 per cent in the half.

Charges for impaired loans were $333 million lower, a boost to the bottom line, but the result also showed a gradual lift in the number of customers falling behind on loans.

Stressed loans, as a percentage of the bank's loan book, edged up from 1.09 per cent to 1.1 per cent but remained very low compared to historical standards.

The bank's net interest margin, which measures funding costs compared with loans, fell to 2.09 per cent, down from 2.1 per cent in the September quarter. Mr Hartzer highlighted the bank's management of its margins, which are a key influence on profitability.

Mr Hartzer said the economic outlook was "subdued", pointing to the uncertain international environment, and the impact of falling house prices on household spending.

“House prices are likely to remain soft and home building is set to reduce through 2019 and into 2020. “We expect system housing credit growth to slow to 3 per cent in the current bank year and fall further next year to 2.5 per cent," he said.

Westpac economists are tipping that the Reserve Bank will cut official interest rates later this year, in a bid to stimulate the economy. Mr Hartzer said the second half of the year would be "challenging," but he reiterated his faith the bank's basic strategy, including its focus on customer service.

Bell Potter analyst TS Lim said Mr Hartzer's commentary on the outlook, including the forecast of further slowing in credit growth, appeared pessimistic. "It's the outlook that's probably a bit lower than expected," Mr Lim said. "It's probably indirectly asking for a rate cut."

Macquarie analysts led by Victor German noted Westpac had introduced a 1.5 per cent discount on its dividend reinvestment plan to help it raise more capital, which they said would lead to "near-term share price weakness" as new shares were issued. They said Westpac's charges for impaired loans were "abnormally low," and they predicted Westpac's result would lead to broker downgrades of the bank's outlook.

BT Financial Group, which will be partly sold off and merged into other divisions of the bank, made a $305 million loss, after it took $620 million in compensation and restructuring costs, and stopped benefiting from "grandfathered" commissions.

In March, Westpac said it would dump its loss-making financial advice business, joining in the other big four in quitting advice after the royal commission exposed widespread consumer rip-offs, including the common charging of fees for services that were not provided.

Its flagship consumer banking arm posted a 11 per cent drop in profit, to $1.5 billion, due to higher funding costs, and remediation expenses, while profits were down 6 per cent in its business banking decision.

In a sign its balance sheet remains strong, Westpac's common equity tier 1 capital was 10.6 per cent of risk-weighted assets. The bank said the federal government's big bank tax cost it $193 million on a pre-tax basis during the half.