Westpac Banking Corporation reported on Thursday first-half net profit of $3.07 billion for the six months to March 31. While it is a 25 per cent decline compared to the same period a year ago, the slump was mainly due to a one-off tax consolidation following Westpac's purchase of St George.

Cash earnings, which excludes one-offs and non-cash accounting items, actually increased 1 per cent to A$3.12 billion, slightly higher analysts' forecast of A$3.11 billion.

"This is a sound result in a challenging environment and reflects continued progress in building a stronger and more productive organisation," Westpac Chief Executive Gail Kelly said in a statement.

Westpac is scheduled to announce on Friday its decision on the Reserve Bank of Australia (RBA) 50-basis points overnight cash rate cut. While the second largest bank by market value has remained tight-lipped about its mortgage interest rates, the new direction to focus on growing the deposit side of business is seen as an indicator that Westpac, like National Australia Bank (NAB) and the Commonwealth Bank of Australia (CBA), would not pass in full the 50-basis points rate cut.

"There has been a shift in the culture of our organisation to be more of a deposit-raising culture than a lending culture," Ms Kelly said. "We want to return to old-style bank and take in money before lending it out," she added.

The move is seen as Westpac's response to the reduction by Australians of debt levels and the higher cost of wholesale funding sourced overseas, which is the reason that NAB and CBA cited to justify not passing in full the RBA rate cut.

NAB passed on to borrowers only 32 basis points of the Australian central bank rate cut while CBA passed on 40 basis points. ANZ is expected to announce its interest rate decision on May 11. Westpac will not follow ANZ's move in making monthly interest rate announcements, Ms Kelly said.

"The ANZ was actually very helpful for the industry as a whole, and it's certainly helped in better articulating that the RBA decision is only one factor in a number of factors, so it's certainly helped very much in that debate.... Our rates are obviously continuously under review," Ms Kelly was quoted by ABC.

Treasurer Wayne Swan has urged the banks to pass in full the 50 basis points so that borrowers would also benefit from the rate cut. At the same time he reiterated a suggestion for borrowers to bring their business to other banks if they are not happy with the rate cuts made by the big 4.

The failure by banks to pass in full the 50-basis points rate cut would mean over 30,000 Australians would suffer serious mortgage stress, according to a study by Roy Morgan Research, a market research firm. Had the banks passed the rate reduction in full, 64,000 Australians would no longer be at the serious risk of being unable to repay their mortgage. However, due to the decision by NAB, CBA and other lenders to keep part of the rate cut, the number of Aussies who would need to allocate at least 30 per cent of income on mortgage repayments would still reach 30,000, the study said.

"There are still nearly 800,000 Australians under mortgage stress so it's quite obvious every decision that make hugely impacts mortgage holders," Roy Morgan's Norman Harris said in a statement.

"It's quite remarkable to see those 10 basis points not passed on by some of the biggest lenders can mean that much for so many mortgage holders," he added.

The refusal to pass the rate cut in full explains the declining satisfaction rating of the big 4 amid impressive quarterly or half-year results reported by the banks.

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