(Reuters) -Australia's Westpac Banking Corp on Monday reported a decline in annual profit but topped analyst forecasts, as resilient credit quality and higher non-interest income helped blunt the impact of rising costs and stiff margin competition. The country's third-largest lender said it expected credit growth to moderate through 2025 before stabilizing in 2026, as higher interest rates and slowing consumption cool the economy and housing demand. It added that strong employment and accumulated savings were helping to limit arrears and defaults. "The economy is cooling but remains resilient," Westpac said in its results filing, noting cost-of-living pressures were easing while the housing market was adjusting in an orderly way. The bank posted a net profit after tax of A$6.99 billion for the year ended September 30, down from A$7.11 billion a year earlier but ahead of Visible Alpha's A$6.83 billion consensus estimate. Credit quality stayed strong. Fewer borrowers fell behind on their repayments, with home loans overdue by more than 90 days dropping to 0.83% from 1.05% a year earlier. The share of loans showing signs of stress also eased slightly to 1.36% of total lending. Because fewer customers were missing payments, the bank set aside less money to cover potential bad debts, just 5 cents for every A$100 of loans from 7 cents a year ago, showing most households and businesses are coping well. Operating expenses jumped 9% to A$11.9 billion, inflated by A$273 million in one-off restructuring costs, heavier technology and transformation spending, and wage growth as the bank hired more frontline staff. The bank's net interest margin, the spread between interest earned from loans and paid to depositors, declined 1 basis point to 1.94% amid persistent competition in lending and deposits. It declared a final dividend of 77 Australian cents per share, up slightly from 76 cents a year earlier. Separately, Westpac announced it had entered into an agreement to sell its A$21.4 billion RAMS mortgage portfolio to a consortium including Pepper Money, KKR and PIMCO. ($1 = 1.5389 Australian dollars) (Reporting by Roushni Nair and Shivangi Lahiri in Bengaluru; Editing by Edmund Klamann and Chris Reese)
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